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Emergency withdrawals of 401(k) plans surge amid economic turmoil

Medical bills, evictions drive jump in cash rush.

Published: February 3, 2023 2:55pm

Updated: February 3, 2023 3:05pm

A high number of Americans drew on their 401(k) retirement plans in 2022 amid economic turmoil and rising costs around the country, according to one investment firm's data. 

Nearly 3% of 401(k) holders with the Vanguard Group pulled cash on their plans in 2022, according to the Wall Street Journal, up from 2.1% the prior year and "a prepandemic average of about 2%."

The investment company told the Journal that "medical bills, eviction or foreclosure" were helping to drive the surge.

Fiona Greig, the global head of investor research and policy at Vanguard, said in a LinkedIn post that "increasing financial stress, rule changes, reductions in red tape, and the increase in auto-enrollment" are also helping to drive the spike in withdrawals.

Relaxations on withdrawal penalties, including amid the pandemic in 2020, have also helped drive up cashouts. 

Fidelity Investment, meanwhile, reports that "about 2.4% of plan participants, or roughly 716,000 workers, tapped their retirement savings in 2022 to prevent hardships, a 26% increase over the prior year," according to the Journal.

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