401(k) Balances Hit a Record High in 2025—So Did Hardship Withdrawals

Key Takeaways

• The average Vanguard 401(k) balance rose to a record $167,970 at year-end 2025.
• The growth was driven by strong stock market gains and Americans’ expanding use of automated savings plans.
• A record 6% of Vanguard participants took a hardship withdrawal in 2025, the sixth straight annual increase and triple the pre-pandemic rate.

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For the sixth straight year, more Americans raided their retirement accounts during a crisis. They also finished the year with more money in their 401(k)s than ever before.

About 6% of workers in Vanguard’s 401(k) plans tapped emergency funds last year, while average account balances also hit an all-time high of $167,970, a 13% annual increase.

The markets rewarded those who stayed invested: the S&P 500 gained 16%, bonds rose 7%. The job market told a different story. Excluding health care, nonfarm payroll employment fell throughout most of 2025, layoffs surged to their highest level since the pandemic, and credit card delinquencies hit a 13-year high.

Saving on Autopilot, Building Record Retirement Savings

Automatic features amplified the 401(k) gains from the stock market.

A record 79% of large Vanguard plans—those with at least 1,000 participants—auto-enrolled new hires in 2025, up from 34% in 2013. Most of these plans also quietly bump that contribution rate a little higher each year, and nearly two-thirds start workers at 4% of their paycheck or more from the beginning.

The share of participants in professionally managed allocations—target-date funds, balanced funds, or managed accounts—hit an all-time high of 69%. That group traded four to five times less frequently than other investors during the market’s volatility after the Trump tariffs in April 2025.

The gap between the average 401(k) balance and the median tells the real story: more Americans are building wealth on autopilot. Yet many are also one medical bill or missed mortgage payment away from raiding their retirement plans.

A Safety Net With a Price Tag

The 6% hardship withdrawal rate, up from 4.8% in 2024 and triple the roughly 2% annual rates before the pandemic, marks the sixth consecutive annual increase since Congress loosened the rules in 2018 by eliminating the requirement to take a 401(k) loan first.

The top reasons workers gave for needing these loans were to avoid foreclosure or eviction and to cover medical expenses. The median withdrawal was $1,900.

“Hardship withdrawals are driven by a few overlapping factors, including ongoing financial pressures for a subset of workers, along with administrative and regulatory changes,” Jeff Clark, Vanguard’s head of defined contribution research, told Investopedia. “More workers are automatically enrolled, saving at higher rates, and building meaningful balances, which means more people actually have retirement assets available if a financial shock occurs.”

Vanguard attributes part of the increase to SECURE 2.0, which in 2022 let administrators rely on self-certification when approving hardship requests—lowering the friction to withdraw. Automatic enrollment has also pulled more lower-income workers into plans, giving more people a balance to draw on when cash runs short.

Workers under 59½ who take a hardship withdrawal from a traditional 401(k) owe income tax on the full amount plus a 10% early withdrawal penalty. At $1,900, that penalty costs $190. The deeper cost is what those dollars would have been after compounding over decades.

Loans from 401(k)s otherwise stayed flat: 13% of participants carried an outstanding loan at year-end 2025, in line with figures from 2024. Hardship withdrawals, unlike loans, don’t require repayment, making them a more lasting hit to long-term savings.

Related Education

401(k) vs. IRA: What’s the Difference?

Steps for a 401(k) Hardship Withdrawal: Eligibility and Tax Implications

Gen X Crosses a Major Savings Threshold

Separate data from Fidelity Investments, also released Wednesday, showed its clients’ average 401(k) balance reached $146,400 at year-end 2025, up more than 11% for the year, the third straight year of double-digit growth. Average 403(b) balances rose 13% to $133,500.

One notable milestone: Gen X workers—the cohort analysts have most often flagged as underprepared for retirement—are now maintaining a total 401(k) savings rate above Fidelity’s recommended 15% threshold, including employer match. As Gen Xers are in their peak earning and saving years, that shift is meaningful.

Meanwhile, Gen Z continued its embrace of Roth IRA accounts: 95% of Gen Z participants directed 401(k) contributions to Roth accounts, compared with 75% of Millennials and 66% of Gen X. Unlike traditional 401(k)s, Roth accounts are funded with after-tax dollars, meaning withdrawals in retirement come out tax-free.

Together, the data from Vanguard and Fidelity make a strong case for not touching your allocation during volatile markets—target-date fund investors who traded were the exception, not the rule, for a reason. Vanguard’s figures came in a preview release Wednesday of its annual “How America Saves” report. The full report is due in June.