#581
Untouchable?
Published:
Mar 08, 2025
Author:
Sarah Parsons Wolter
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Once a sacred nest egg for retirement, the 401(k) is now pulling double duty as America’s emergency fund. A record 4.8% of account holders tapped their retirement savings for hardship withdrawals last year—more than double the pre-pandemic average. The reasons? Avoiding foreclosure, covering medical bills, and keeping up with the rising cost of living.
This shift isn’t happening in a vacuum. More employers are automatically enrolling workers into 401(k) plans, including those with little to no emergency savings. Meanwhile, Congress has already made it easier to withdraw funds, scrapping old restrictions and introducing a new rule allowing one penalty-free annual withdrawal of up to $1,000 for emergency expenses—provided it’s repaid before taking another.
At the same time, personal finances are being pulled in different directions. Unemployment remains low, wages are rising, and 401(k) balances hit an all-time high in 2024, buoyed by strong market performance. Yet, higher everyday costs are putting pressure on household budgets, and with more people falling behind on auto loans and credit-card payments, some are turning to their retirement savings for short-term relief.
Retirement savings were once considered untouchable—like a priceless artifact behind bulletproof glass, admired but never within reach. But they’re slowly becoming a tool to navigate life’s financial twists and turns. If this trend continues, will 401(k)s become just another everyday resource, or will we eventually have to put the ropes back up and remind ourselves—No touching!
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Untouchable?
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