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401(k) Hardship Withdrawal Rate - Are we concerned?
Posted on 7/1/26 at 12:19 am
Posted on 7/1/26 at 12:19 am
Data from major retirement plan administrators (such as Vanguard) confirms that hardship withdrawals from 401(k) accounts have risen to 6%.. This is up from a historical pre-covid average of roughly 2%.
Secure Act 2.0 doing work.
Secure Act 2.0 doing work.
This post was edited on 7/1/26 at 12:20 am
6
Posted on 7/1/26 at 9:06 am to FAT SEXY
The recession is always 6 months away.
Posted on 7/2/26 at 11:35 am to FAT SEXY
“K” shape economy getting real.
Posted on 7/3/26 at 2:37 am to P0SEIDON
quote:
K Shape Economy
There's merit to this theory. If it is true(likely), it's 100% based off of a fiat system in conjunction with our reserve currency status. We can just inflate and those privy to it can take advantage of it..
As far as the OP goes, it's interesting data to me..
I'm always looking for the proverbial canary to chirp.
Maybe this is simply people looking for alternative retirement vehicles? Maybe it's actual distress?
It's hard to trust the system we find ourselves in tbh.
Posted on 7/3/26 at 6:40 am to FAT SEXY
Doesn't surprise me with the endless news of layoffs and lack of new job creation.
Americans are struggling right now with inflation
Americans are struggling right now with inflation
Posted on 7/3/26 at 9:46 am to FAT SEXY
I chalk it up to more people just being stupid and financially irresponsible. The economy could be booming, and those same folks would be in a financial emergency.
Posted on 7/3/26 at 10:11 am to FAT SEXY
Big expense households with someone losing their job.
Posted on 7/3/26 at 10:50 am to FAT SEXY
I know two coworkers that recently did it, due to the student loan repayment rules changing. It made more sense to eliminate high interest debt.
Posted on 7/3/26 at 10:51 am to Twenty 49
quote:
I chalk it up to more people just being stupid and financially irresponsible. The economy could be booming, and those same folks would be in a financial emergency.
Posted on 7/3/26 at 3:43 pm to Twenty 49
quote:
I chalk it up to more people just being stupid and financially irresponsible.
Stupid and financially irresponsible people do not save for retirement into 401ks. People could be doing any number of things with the money, but it is a much more disturbing trend than you give it credit for being.
Posted on 7/3/26 at 6:52 pm to go ta hell ole miss
I work in a plant. In every control room, folks brag about their 401k loans. Most have 2. Braces, boats, and vehicles are all the "hardships" these folks have.
One dude said he took out a loan and paid for his truck in cash.
One dude said he took out a loan and paid for his truck in cash.
Posted on 7/3/26 at 8:04 pm to Twenty 49
quote:what does this have to do with the OP? They said the RATE has increased. People have always been stupid and financially irresponsible
I chalk it up to more people just being stupid and financially irresponsible. The economy could be booming, and those same folks would be in a financial emergency.
Posted on 7/3/26 at 8:45 pm to castorinho
people may contribute the minimum to their 401k's but when they realize its a decent amount of money, they lack discipline and want to spend it right away
Posted on 7/3/26 at 8:55 pm to 3D
Again. Nothing to do with the OP
Posted on 7/4/26 at 7:24 am to castorinho
quote:
what does this have to do with the OP? They said the RATE has increased. People have always been stupid and financially irresponsible
There are more of them every day. They reproduce, and they’re jealous of coworker”s boat he bragged about getting w a hardship withdrawal.
Posted on 7/6/26 at 9:33 pm to Twenty 49
Definitely not always the case… your painting with a broad brush …
Ever been laid off? Went from $130-150k/yr to $85k. 9 years later still not back…
Life’s tough sometimes … sounds like you haven’t experienced what a lot of others have. Count your blessings, and don’t look down on others when you aren’t sure of there situation.
A lot of good people, with strong financial sense, that have to do what they have to do. I’m speaking from experience
Ever been laid off? Went from $130-150k/yr to $85k. 9 years later still not back…
Life’s tough sometimes … sounds like you haven’t experienced what a lot of others have. Count your blessings, and don’t look down on others when you aren’t sure of there situation.
A lot of good people, with strong financial sense, that have to do what they have to do. I’m speaking from experience
Posted on 7/7/26 at 9:35 am to xBirdx
I had to make several loans against my 401k and even a couple of unqualified distributions while in my 30s just to take care of myself and my family. It happens. It was my money I elected to use it to solve short term problems in lieu of long term gain.
this trend if accurate could be indicative of any number things, one of which being that many folks have invested more money than they actually can afford
this trend if accurate could be indicative of any number things, one of which being that many folks have invested more money than they actually can afford
Posted on 7/7/26 at 4:18 pm to FAT SEXY
not a good sign at all
but what is the cause?
Majority of hardship cases are "risk of losing house"
quick AI search said mortgage delinquencies are around 4.4% which is up YoY since 2022 (all time low) and 2010 (housing crisis time frame) was 8%
next big ticket item is vehicles, so i did a second quick AI Search:
Nationwide, the 90-day+ auto loan delinquency rate reached 5.6% in early 2026, up over 59% compared to a decade ago. Driven by record vehicle prices and longer loan terms, the dollar amount of delinquent debt has surged, with subprime delinquencies hitting 32-year highs.
wonder if the 72, 84, and 96 month loans at $700+/mo and upside down trade ins are starting to add up.....
but what is the cause?
Majority of hardship cases are "risk of losing house"
quick AI search said mortgage delinquencies are around 4.4% which is up YoY since 2022 (all time low) and 2010 (housing crisis time frame) was 8%
next big ticket item is vehicles, so i did a second quick AI Search:
Nationwide, the 90-day+ auto loan delinquency rate reached 5.6% in early 2026, up over 59% compared to a decade ago. Driven by record vehicle prices and longer loan terms, the dollar amount of delinquent debt has surged, with subprime delinquencies hitting 32-year highs.
wonder if the 72, 84, and 96 month loans at $700+/mo and upside down trade ins are starting to add up.....
Posted on 7/7/26 at 4:59 pm to cgrand
Yep.. double edged sword.
Great to invest, but makes you cash poor sometimes
Great to invest, but makes you cash poor sometimes
Posted on 7/8/26 at 6:14 am to MexicanBurtReynolds
quote:
I work in a plant. In every control room, folks brag about their 401k loans. Most have 2. Braces, boats, and vehicles are all the "hardships" these folks have.
One dude said he took out a loan and paid for his truck in cash
The only caveat I’d add is that a 401(k) loan is different from a hardship withdrawal.
With a loan, you’re required to pay yourself back, including interest, which is currently around 7% in many plans. So in a sense, you’re repaying your own account and partially replacing some of the market return you may have missed while the money was out of the plan which isn't the worst thing in the world (long term) so long as you are continuing normal deferrals.
That said, I’ve personally noticed an uptick in loans, especially for medical-related expenses. That’s where I really wish the IRS would issue clearer guidance on PLESAs. A properly implemented emergency savings option could help cover many of these situations before people feel forced to tap their retirement accounts.
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