Key Takeaways
- Nearly 40% of workers report taking a loan, early withdrawal, or hardship withdrawal from their IRA, 401(k), or similar retirement account, according to a new survey from Transamerica Center for Retirement Studies.
- A financial emergency, paying off debt, everyday expenses, unplanned major expenses, medical bills, and home improvements are cited most frequently as reasons workers take a loan from their 401(k) or similar plan.
- Top reasons given for making hardship withdrawals include medical expenses, higher education payments or homebuying expenses.
Despite potential penalties for tapping into retirement savings before reaching 59 and a half, many workers report doing that during financial difficulty.
A new survey released this month from the Transamerica Center for Retirement Studies shows that 37% of workers report taking a loan, early withdrawal, or hardship withdrawal from their IRA, 401(k), or similar retirement account.
Respondents across generations cited a financial emergency as the most frequently cited reason for taking a loan from a 401(k) or similar plan. Other reasons include paying off debt, everyday expenses, unplanned major expenses, medical bills, and home improvements.
Based on the findings of this report, Gen Z and Millennial workers are more likely than previous generations to have taken an early or hardship withdrawal. They are also more likely to take out a 401(k) loan to pay for medical bills, everyday expenses, and eviction avoidance.
Workers’ top reason for making a hardship withdrawal is to pay for medical expenses. Other top reasons were to help cover tuition and related educational fees, costs, and losses incurred in a federally declared disaster area, expenses for qualified repairs to a damaged principal residence, and payments to prevent eviction from a principal residence.