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“Whenever you find yourself on the side of the majority, it is time to reform (or pause and reflect).”
― Mark Twain
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Increasing Number 401k Hardship Withdrawals
Vanguard reports that Americans’ retirement savings rates have reached record highs, yet more people are dipping into their 401(k)s for financial emergencies. In 2024, 4.8% of participants took hardship withdrawals — up from 3.6% in 2023 and 2.8% in 2022. These withdrawals, often used to prevent eviction, cover medical bills, or repair homes, have risen as more plans allow them and as many households struggle with rising living costs and limited emergency savings.
Financial experts warn that early withdrawals should be a last resort due to taxes, penalties, and the loss of long-term growth. A $30,000 withdrawal at age 35, for example, could mean forfeiting over $500,000 in potential retirement value by age 65. Alternatives like home equity loans or short-term credit may be less damaging, and borrowing from a 401(k) (rather than withdrawing) can be a better option. Ultimately, experts urge proactive financial planning and building emergency reserves to avoid tapping retirement funds.
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