Retirement Accounts Just Hit a Record High. So Did the Number of People Raiding Them.

Two numbers from the same 2026 report, sitting right next to each other, that don't seem to belong in the same story.

Number one: the average 401k balance hit $167,970 at the end of 2025 — a record high, up 13% in a single year, according to Vanguard's How America Saves 2026 report, which tracks nearly 5 million retirement accounts.

Number two, from that same report: 6% of participants made a hardship withdrawal in 2025 — the sixth consecutive year that number has climbed, and triple the rate seen before 2020.

Retirement accounts, on paper, have never looked healthier. And more people than ever are being forced to pull money out of them early just to get through a financial emergency.

Here's how both things are true at once. The record average is pulled upward by a relatively small group of long-term, high-balance savers who benefited from a strong stock market. The hardship withdrawal surge is happening among a completely different group — people living paycheck to paycheck with no emergency fund, for whom their 401k has quietly become the only large pool of money they have access to when a real emergency hits.

The median hardship withdrawal was just $1,900. Not a life-changing sum — but enough to reveal that for a growing share of workers, there's simply nowhere else to turn when a car repair, medical bill, or missed paycheck happens.

The real cost of a hardship withdrawal is bigger than the amount taken out. That money stops compounding immediately. $1,900 pulled out at age 35 is roughly $15,000 in lost growth by age 65, assuming typical market returns. Withdrawals also usually trigger income tax plus a 10% early withdrawal penalty if you're under 59½ — meaning the amount that actually reaches your bank account is smaller than what left your retirement account.

The uncomfortable truth this data points to: the real fix isn't a better 401k strategy. It's having an emergency fund completely separate from retirement savings, so a $1,900 problem never has to become a permanently smaller retirement.

Have you ever had to consider pulling from retirement savings early? What would have stopped you from needing to?