--- title: 'More Cash-Strapped Americans Are Raiding Their 401(k)s: Report' description: Amid sky-high interest rates and inflation, Americans are searching for extra cash — and willing to tap their retirement funds to find it. authors: - name: Sarah Hansen role: Senior Writer url: https://money.com/author/sarah-hansen/ bio: Sarah Hansen is a senior writer at Money covering all things personal finance. Previously, she covered economic policy and capital markets on the breaking news desk at Forbes. education: Northwestern University, New York University at_money_since: 2021 articles: 347 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes social: - https://www.linkedin.com/in/sarah-m-hansen/ former_staff: true editors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2023-08-09T19:35:51.000Z' modified: '2024-01-10T15:06:07.000Z' section: Retirement tags: - News word_count: 514 canonical: https://money.com/401k-hardship-withdrawal-increase/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Photo-illustration of hands reaching for money and a spiking graph.](https://img.money.com/2023/08/News-401K-Hardship-Withdrawals-Spiked.jpg) More cash-strapped Americans are raiding their 401(k)s, according to [new survey data](https://business.bofa.com/content/dam/flagship/workplace-benefits/id20_0905/documents/Participant-Pulse.pdf) from Bank of America. Of the more than 4 million participants in Bank of America client employee benefits programs, nearly 16,000 took a hardship distribution from their [401(k) plan](https://money.com/401k-and-401k-rollover/) in the second quarter of this year (the months of April, May and June). That’s up 12% compared to the first quarter — and up 36% from to the second quarter of 2022. On average, participants took withdrawals that amounted to a little over $5,000 in the second quarter. That’s a little less than the average withdrawals in the first quarter ($5,100) and in the second quarter of last year ($5,400). Bank of America also found that more participants took loans from their 401(k)s in the second quarter compared to the first quarter. Taken together, the data is a sign that, amid sky-high [interest rates](https://money.com/how-high-interest-rates-impact-stocks-bonds/) and two years of high [inflation](https://money.com/inflation-june-2023-rent-insurance/), Americans are looking for extra cash — and willing to tap their retirement funds to find it. “This year, more employees are understandably prioritizing short-term expenses over long-term saving,” Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, said in a [news release](https://www.prnewswire.com/news-releases/bofa-report-finds-average-401k-balances-up-nearly-10-in-2023-more-participants-taking-hardship-withdrawals-301895607.html) on Tuesday. A 401(k) is an investment account designed to help American workers save for retirement. Eligible employees can contribute a portion of their paychecks before taxes, and that money grows tax-free. In normal circumstances, you’ll incur a fee of 10%, in addition to your regular income taxes, on any money you withdraw from your 401(k) before age 59 ½. But in certain cases, the IRS allows you to make what it calls a “[hardship distribution](https://money.com/401k-withdrawals-covid-vanguard-study/)” and avoid that penalty. According to the IRS, these types of withdrawals can be made because of an “[immediate and heavy](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions)” financial need, like a medical expense, funeral cost or unexpected home repair bill. The amount you take of your account can’t be greater than what’s necessary to cover that need. ## Should you take a 401(k) hardship distribution? You should think carefully before you withdraw money from your 401(k). The decision could be costly. You won’t avoid extra expenses on what you take out of your plan, for one. You’ll still have to pay income tax on that money, for instance. That’s not to mention the [hit](https://money.com/401k-early-withdrawal-costs/) that your retirement savings will take. You won’t be able to put any of the money back in the plan like you would with [a 401(k) loan](https://money.com/401k-loan-why-borrow/), though you can still make future contributions through your paychecks as usual. By removing money now, you’re taking any potential investment growth out of the equation, and you could end up derailing your long-term plan. That's why experts often recommend looking for [emergency cash](https://money.com/what-is-an-emergency-fund/) in other places before raiding your tax-advantaged retirement accounts. “It's critical that employees continue to invest in life's biggest expense — retirement,” Sabbia said. [Cashing Out a 401(k): What a 401(k) Early Withdrawal Really Costs](https://money.com/401k-early-withdrawal-costs/) [Can I Use My 401(k) To Buy a House?](https://money.com/use-401k-to-buy-a-house/) [4 Reasons to Take Out a 401(K) Loan](https://money.com/401k-loan-why-borrow/) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/401k-hardship-withdrawal-increase/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Retirement", "item": "https://money.com/retirement/" }, { "@type": "ListItem", "position": 3, "name": "401(k)", "item": "https://money.com/401k/" }, { "@type": "ListItem", "position": 4, "name": "More Cash-Strapped Americans Are Raiding Their 401(k)s: Report" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/401k-hardship-withdrawal-increase/#webpage", "url": "https://money.com/401k-hardship-withdrawal-increase/", "name": "More Cash-Strapped Americans Are Raiding Their 401(k)s: Report", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-08-09T19:35:51.000Z", "mainEntity": { "@id": "https://money.com/401k-hardship-withdrawal-increase/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/401k-hardship-withdrawal-increase/#breadcrumb" }, "dateModified": "2024-01-10T15:06:07.000Z" }, { "@type": "NewsArticle", "headline": "More Cash-Strapped Americans Are Raiding Their 401(k)s: Report", "articleSection": "Retirement", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/08/News-401K-Hardship-Withdrawals-Spiked.jpg", "width": 2880, "height": 1920, "caption": "News-401K-Hardship-Withdrawals-Spiked" } ], "author": [ { "@type": "Person", "name": "Sarah Hansen", "url": "https://money.com/author/sarah-hansen/", "@id": "https://money.com/author/sarah-hansen/#author", "description": "Sarah Hansen is a senior writer at Money covering all things personal finance. 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