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Vanguard Reports Record Number Of “Hardship Withdrawals” From 401ks

Vanguard Reports Record Number Of “Hardship Withdrawals” From 401ks

Vanguard Reports Record Number Of “Hardship Withdrawals” From 401ks

The coronavirus pandemic has caused unprecedented economic hardship for many Americans, and one of the most visible signs of this is the record number of “hardship withdrawals” from 401ks. According to Vanguard, the nation’s largest 401k provider, there has been a dramatic increase in the number of people taking out funds from their retirement accounts.

The number of hardship withdrawals from Vanguard’s 401ks has more than doubled since the start of the pandemic. In the first quarter of 2020, the company recorded nearly 20,000 hardship withdrawals, compared to just over 8,000 in the same period last year. This is a significant increase, and it shows just how much financial stress many Americans are currently under.

The reasons for the hardship withdrawals are varied, but the primary reason is to cover basic living expenses. Many people have lost their jobs or had their hours reduced, and they are turning to their retirement accounts to make ends meet. This is a worrying trend, as it shows that many people are dipping into their retirement funds to make it through the current crisis.

The increase in hardship withdrawals is also concerning because of the potential long-term implications. Taking money out of a retirement account can have serious consequences, as it can reduce the amount of money that is available for retirement. Additionally, if a person takes out too much money, they may be subject to a 10% penalty, as well as taxes.

Despite the potential risks, the increase in hardship withdrawals is an understandable reaction to the current economic environment. Many people are facing difficult financial decisions, and dipping into their retirement accounts may be their only option.

Fortunately, there are steps that people can take to minimize the potential damage to their retirement funds. First, they should make sure that they are taking out only what is necessary to cover their basic living expenses. It is also important to remember that any money taken out of a retirement account will be subject to taxes and penalties.

Additionally, it is important to consider other sources of financial assistance, such as unemployment benefits or government assistance programs. These may be able to provide the necessary funds without having to dip into retirement savings.

Finally, it is important to remember that the current situation is temporary, and the economy will eventually recover. This means that it is important to keep saving for retirement, even if it is only a small amount. Taking out a hardship withdrawal can have serious consequences, but it is important to remember that it is a short-term solution to a long-term problem.

The record number of hardship withdrawals from 401ks is a worrying trend, but it is also understandable given the current economic environment. It is important to remember that any money taken out of a retirement account will be subject to taxes and penalties, and that other sources of financial assistance should be explored. Additionally, it is important to keep saving for retirement, even if it is only a small amount. Doing so will help ensure that retirement funds are available when they are needed most.

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