A record share of Americans are tapping their retirement savings accounts to cover emergency expenses, according to new data from financial services firm Vanguard.

In 2025, 6% of people enrolled in Vanguard 401(k) plans made so-called hardship withdrawals from their accounts, up from 5% in 2024, according to the company's 2026 report on Americans' savings habits.

The share of workers tapping hardship withdrawals has risen in recent years, reflecting the financial pressure many households face when unexpected bills hit. Hardship withdrawals are permitted by the IRS for a limited number of financial issues, including covering medical care or payments to avoid eviction or foreclosure.

The rising incidence of hardship withdrawals highlights the importance of setting aside money for emergencies, Vanguard's Jeff Clark, head of defined contribution research and the author of the report on savings, told CBS News.

Retirement funds are increasingly providing a financial buffer when households lack other resources.

"With more sponsors auto-enrolling workers, people saving at higher rates, they're building meaningful balances, and so they have retirement assets available if a financial shock occurs," he told CBS News. "It's inadvertently providing a financial safety net because if they hadn't been auto-enrolled, they might not have had those assets to tap into for an emergency."

Many workers are enjoying bigger 401(k) balances due to stock gains during the past few years, as well as design improvements that have made it easier for employees to save. Auto enrollment and similar features helped 45% of plan participants increase their savings rates last year, Vanguard said.

At the end of 2025, the average account balance sat at $168,000, up 13% from the end of 2024, driven by strong stock market performance, the company said.

Congress has also made it easier for workers to make hardship withdrawals. For example, a 2022 law lets employees take money out if they are victims of domestic abuse, or for federally declared disasters. The same law allows them to make a penalty-free withdrawal of up to $1,000 once every three years.

In 2025, the median withdrawal amount was $1,900, according to Vanguard.

These were the top reasons people tapped into their 401(k)s:

o Avoiding foreclosure or eviction: 36%
o Medical expenses: 31%
o Tuition: 13%
o Primary residence repairs: 11%
o Primary residence purchase: 5%

The withdrawals also underscore a broader challenge: many Americans have little retirement savings to fall back on.

Research shows that Americans are behind when it comes to saving for retirement, with the median working-age American having only socked away $1,000 for their golden years, according to a 2026 report from the National Institute on Retirement Security.

That figure includes people with retirement plan savings as well as those who lack access to an employer-sponsored plan.

Another report from the AARP found that more seniors — about 7% of retirees —are returning to the workplace after retiring, citing financial pressures.

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