Americans Increasingly Tap Into Retirement Savings Amid Economic Strain

Fidelity reports a rise in early withdrawals and loans from 401(k) accounts, highlighting the need for emergency savings.

More Americans are withdrawing from their retirement savings early, with 2.3% of Fidelity plan participants taking hardship withdrawals in the third quarter of 2023, up from 1.8% in the same period of 2022.
The average 401(k) balance fell 4% in the third quarter of 2023, with the typical balance dropping from $112,400 to $107,700.
Hardship withdrawals are typically made to avoid foreclosures or cover medical expenses, and are subject to income tax and potentially an additional 10% tax if made before age 59.5.
The percentage of participants taking loans from their 401(k)s also increased to 2.8% from 2.4% in the same quarter last year, with the percent of outstanding 401(k) loans standing at 17.6% versus 17.2% in the second quarter.
Fidelity Investments suggests that the increasing use of hardship withdrawals and loans underscores the need for retirement savers to develop emergency savings.