Record 401(k) Balances, Record Raids on 401(k)s

The average is not the person

Start with the balance. The $167,970 average sits alongside a median of $44,115.

That is a factor of nearly four. It’s the same distortion that shows up in side hustle income and household wealth: a right-skewed distribution where a small number of very large accounts drag the mean far above the typical account. When a headline says the average 401(k) balance hit a record, the accurate translation is that the top of the distribution had a very good year in the stock market.

The median rose too — up 16% — so this isn’t only a top-end story. But if you’re benchmarking yourself against a number, the median is the one that describes a real person. Almost every article you’ll see uses the mean, because it’s bigger.

The withdrawals are the tell

Hardship withdrawals have now risen for six consecutive years. The median one was $1,900. The most common reason given was avoiding foreclosure or eviction, followed by medical costs.

Nineteen hundred dollars. That is not a lifestyle expense. It’s roughly a rent payment, and people are paying a tax penalty and permanently removing the money from the market to cover it — because unlike a 401(k) loan, a hardship withdrawal cannot be paid back in.

Part of the increase is mechanical rather than economic. Congress loosened the rules in the Bipartisan Budget Act of 2018, removing the requirement to take a plan loan before requesting a hardship withdrawal, and the process has been streamlined since. Easier access produces more usage independent of need. Automatic enrollment is also up sharply — 61% of Vanguard’s employer clients now auto-enroll — which has pulled millions of lower-income workers into plans, giving more people a balance to draw on in the first place. Some of the rise is genuinely a sign the system is working: money exists to be tapped that previously wouldn’t have.

But six straight years of increases, tripling off the pre-pandemic baseline, is not explained by paperwork alone. And the loan rate tells you something by staying still: about 13% of Vanguard participants carry an outstanding 401(k) loan, roughly flat since 2021. Loans get repaid. Withdrawals don’t. The composition is shifting from borrowing toward permanent depletion.

The Fed sees the same thing from the household side

The Federal Reserve’s 2025 household survey found that 14% of non-retired adults had borrowed from, cashed out of, or reduced contributions to a retirement account in the prior twelve months — 5% borrowed, 4% cashed out, 8% cut contributions.

What makes the Fed data useful is that it cross-references against hardship. Among non-retirees who had a major unexpected expense, 7% borrowed from retirement accounts against 3% of those who didn’t, and 5% cashed out against 2%. Among those who’d been laid off, 15% cut their contributions against 7% who hadn’t.

That’s the mechanism, visible directly: an emergency arrives, there’s no cushion, the retirement account is the cushion.

What it costs

The Fed also asked non-retirees whether they felt their retirement savings was on track. Overall, 35% said yes — a number that has been stuck for years and is well below the 2021 reading.

Among those who had cashed out retirement funds in the past year, it was 24%.

Some of that is people accurately reading their own situation. But it also describes a trap that closes on itself: no emergency savings means the retirement account absorbs the shock, and absorbing the shock means falling further behind, which makes the next shock more likely to land the same way.

The takeaway

Record balances and record withdrawals in the same report is not a paradox. It’s what a K-shaped outcome looks like in a single dataset. Equity markets had a strong year, which is excellent for people whose 401(k) they don’t need to touch. A rising minority are treating theirs as an emergency fund of last resort, and paying a penalty for the privilege.

If you want one number: the median hardship withdrawal was $1,900. Whatever else is true about the economy, a meaningful and growing share of American workers are breaking into their retirement savings for less than two thousand dollars.