The Vanguard 2025 retirement report shows 6 percent of Americans pulled from their 401K – up one percent from 2024. The average amount is just under $2,000 and the leading reason at 36 percent- to avoid eviction or foreclosure.
Financial Planner, Bill Dendy, says the Biden inflation made matters worse. “A lot of families experienced a terrible crush when we had inflation, which was almost double digits. Instead of cutting back in their lifestyle, they then turned to their retirement plans.” Dendy said.
The soaring prices at the gas pump, paired with the higher cost of groceries- made it harder for Americans to make ends meet.
Thankfully, the government has permitted alternative options for easy access to the funds including provisions in the Secure 2.0 Act that allow penalty-free withdrawals in certain circumstances such as domestic abuse, federally declared disasters, and a limited emergency personal withdrawal of up to $1,000 with repayment rules tied to future use.
“This at least allows Americans to keep pushing the hard decisions down the road- a little more and more- but in doing so, they may be jeopardizing their ability to retire comfortably.” Dendy said.
He says prices are still up along with a strain on the labor market- with wages falling behind consumer costs. “Things are still going up in costs, but not by the same dramatic amounts each year. It’s a whole lot more manageable.” He said.