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ILLUSTRATION: THE WALL STREET JOURNAL, PIXELSQUID (2)
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The 401(k) is doing double duty as both a retirement account and a source of emergency funds for more Americans.
A record share of 401(k) account holders took early withdrawals from their accounts last year for financial emergencies, according to internal data from Vanguard Group. Overall, 3.6% of its plan participants did so last year, up from 2.8% in 2022 and a prepandemic average of about 2%.
Retirement plans such as the 401(k) are designed to keep Americans’ nest eggs out of reach until later in life. And values in these accounts have risen substantially, in part because of a strong stock market and programs that automatically funnel money from people’s paychecks into their 401(k) accounts.
These surging balances, however, have helped make more people comfortable dipping into their accounts when needed.