4 Reasons People Are Using 401(k)s for Emergencies, According to Vanguard

Vanguard recently released its 2025 report on how America saves. It revealed that a record 4.8% of 401(k) holders took a hardship withdrawal in 2024, up from 1.7% in 2020.

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So why are more Americans raiding their retirement accounts? The report listed the following reasons for hardship withdrawals.

Avoid Foreclosure or Eviction

Over a third (35%) of account holders who took a hardship withdrawal listed avoiding foreclosure or eviction as their motivation.

“Traditionally, homeowners in financial distress might refinance or tap home equity to stay afloat,” said Josh Richner of FaithWorks Financial. “But with mortgage rates hovering near 7%, refinance volume has dropped to its lowest level since the mid-1990s. That leaves many turning to the only sizable resource they can access: their retirement savings.”

Medical Expenses

At 30%, medical expenses made up the second most common driver of hardship withdrawals last year.

It doesn’t help that many Americans have little to no emergency savings. A study by GOBankingRates found that half of Americans have $500 or less in savings.

Home Repair or Purchase

Vanguard reported that 16% of hardship withdrawals went to cover a home repair or purchase.

Brett Daniel, founder of Daniel Safe Money Retirement Solutions, cautioned homebuyers against raiding their retirement savings. “While purchasing a home can make a great financial investment, using retirement savings for the down payment or home repairs is risky due to the fees involved on the amount withdrawn from your 401(k).”

It also leaves you with less money in financial investments to compound throughout your career and pay for your retirement.

Tuition Costs

Another 14% of hardship withdrawals went to covering tuition costs, and 5% were uncategorized.

While some of those withdrawals helped the account holders themselves get degrees and improve their future earnings, some likely went to account holders’ children. But most financial experts agree that’s a dangerous path, as children have many options to fund their college degree, but retirees have just one: their savings.

“Parents looking to help with tuition should look at 529 college savings plans or Coverdell Education Savings Accounts, rather than draining their own retirement accounts,” Daniel said.