Hardship withdrawals continue a slow upward climb, with about 6% of eligible participants taking at least one in 2025, compared with 5% in 2024.1,2
According to our research, the increase reflects plan design options that shape access to savings, even as broader financial pressures—often assumed to be a key driver—remain in place.
Why hardship withdrawals are rising
The role of plan design
Figure 1. Hardship withdrawal rates by administrative process
Plan design also plays a role in hardship withdrawal behavior. Automatic enrollment, for example, broadens participation—especially among lower‑income workers—and is associated with modestly higher hardship withdrawal use. This pattern reflects limited short‑term financial capacity among many participants: A Vanguard survey found that 45% of participants have less than $2,000 in emergency savings.4
It’s important to keep in mind that hardship withdrawals are occurring alongside otherwise strong retirement system fundamentals. Automatic enrollment, automatic contribution escalation, and professionally managed allocations have materially improved retirement savings for millions of workers. The challenge lies in preserving long-term savings when short-term financial flexibility is limited.
Solutions for plan sponsors
The research points to several ways plan sponsors can address this tension without undermining retirement goals. Emergency savings programs, health savings accounts (HSAs), and advice services can help redirect short‑term needs away from retirement assets. Plans offering a Vanguard Cash Plus Account to help participants save for emergencies as well as immediate needs see 16% lower hardship withdrawal rates. Those with integrated HSAs see even greater reductions—69% lower overall and 43% lower among lower-income participants.5
These tools are most effective when integrated into a broader financial wellness strategy. Financial wellness—the ability to manage day‑to‑day finances while planning for future goals—can help participants make informed decisions about when and how to access retirement funds. For some, building emergency savings outside the plan may prevent hardship withdrawals altogether; for others, particularly higher‑income participants using hardship withdrawals for short-term planned expenses, targeted education may support better long-term outcomes through more efficient saving strategies.
Used thoughtfully, these approaches can reduce reliance on hardship withdrawals while preserving the plan’s core purpose.
Sources:
1 Jeffrey W. Clark. How America Withstands Financial Hardships. Vanguard, March 2026.
2 How America Saves 2025, Vanguard.
3 Clark, How America Withstands Financial Hardships.
4 Clark, How America Withstands Financial Hardships.
5 Clark, How America Withstands Financial Hardships.
Notes:
All investing is subject to risk, including the possible loss of the money you invest.
The Vanguard Cash Plus Account is a brokerage account offered by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC. Under the Sweep Program, Eligible Balances swept to Program Banks are not securities: they are not covered by SIPC, but are eligible for FDIC insurance, subject to applicable limits. Money market funds held in the account are not guaranteed or insured by the FDIC, but are securities eligible for SIPC coverage. See the Vanguard Bank Sweep Products Terms of Use and Program Bank List for more information.
