Vanguard data shows Americans are pulling money out of their retirement accounts early at record rates to help make ends meet.

Data from Vanguard shows Americans are pulling money out of their retirement accounts early at record rates to help make ends meet.

Last year, 6% of Vanguard’s clients took a hardship withdrawal, which allows them to access funds in tax-advantaged retirement accounts, such as a 401(k), before they reach retirement age. That was up from 4.8% in 2024, the asset management giant said.

Taking a hardship withdrawal is not ideal for a few reasons, one of them being that investors are subject to a withdrawal penalty of 10% for taking money out of their account before 59½. On top of that, they are then taxed on any gains. However, perhaps most importantly, they rob themselves of future growth potential on that money, especially if they are still far from retirement age.

  • bitchkatEnglish
    21·
    8 小时前

    Yes of course but what we’re discussing here is ramifications of early withdrawal. There is a 10% penalty on top of the regular income tax.

    • jacksilver
      2·
      7 小时前

      Fair, I was trying to add context on why there is a penalty. Should have made that more clear.