Early withdrawals from retirement accounts, also known as hardship withdrawals, are quietly becoming an important indicator of financial stress in the United States. While headlines suggest a strong economy, newly released data from Vanguard show a very different picture for workers under financial stress.
Hardship Withdrawals as a Stress Signal
In 2025, about 6% of workers with a Vanguard‑administered 401(k) took a hardship withdrawal, roughly three times the pre‑pandemic rate of about 2%. More telling is that people are tapping their accounts to cover essential expenses. Median withdrawals are around $1,900 and are used for a number of reasons including avoiding eviction, keeping the lights on, or paying medical bills.
Breakdowns of the data by race reveal stark disparities. According to the 2025 Employee Benefit Research Institute (EBRI)/Greenwald Retirement Confidence Survey, 29% of Black adults with access to a workplace retirement plan reported taking a hardship withdrawal, compared with 15% of non‑Black adults. Black respondents were also more likely to say they withdrew money simply to cover day‑to‑day expenses.
These patterns indicate that hardship withdrawals are not evenly distributed across the population and are concentrated in communities that already face weaker access to retirement plans and higher exposure to debt.
Who Has Retirement Accounts and Who Does Not
The Black Wealth Data Center’s (BWDC) analysis of Survey of Consumer Finances data reveals how uneven this access is at the household level.
In 2022, 61.7% of White households held a retirement account, compared with 34.7% of Black households and 27.5% of Hispanic households, both below their 2007 levels.
Among households that had these accounts, White households held a median of about $100,000 in retirement savings in 2022, compared with only $39,000 for Black households and $55,600 for Hispanic households.
While these figures describe households, not individual workers, together with the Vanguard and EBRI data they suggest that hardship withdrawals are more likely to come out of accounts held by people who already have lower balances and less widespread access to plans.
When hardship withdrawals show up in the national data, they are drawing on very different kinds of balance sheets. For many White households, a withdrawal may come from one of several retirement accounts and sits alongside other assets; for many Black and Hispanic households, it is often a raid on the only formal wealth‑building account they have.
These trade‑offs extend beyond workplace plans. Social Security, which constitutes a much larger share of retirement income for Black retirees than for White retirees, provides 72 percent of income on average and serves as the only source of income for two in five African American retiree households age 65 or older receiving benefits. This reliance also forces difficult trade-offs between immediate needs and long-term security. Black and Hispanic workers are more likely to claim benefits as soon as they are eligible, often because physically demanding jobs, health problems, unstable employment, or a lack of other savings make it hard to keep working. Claiming early permanently reduces monthly benefits, cuts that can reach roughly 25 to 30 percent of the full benefit amount, and those losses fall hardest on workers with lower lifetime earnings and shorter life expectancy, conditions that disproportionately describe Black workers.
How the Racial Wealth Divide Deepens Retirement Insecurity
What this data ultimately reveal is not simply a pattern of financial stress, but the deep structural consequences of the racial wealth divide. For Black households, retirement accounts are not one component of a diversified portfolio — they are often the primary, and sometimes only, source of long-term financial security. When those accounts are tapped early, the impact is not marginal; it is foundational.
The median Black household holds roughly one-third to one-half the retirement savings of White households, and is far less likely to have access to multiple wealth-building assets such as home equity, investments, or inheritances. This means that a hardship withdrawal is not just a temporary bridge — it is a permanent reduction in already limited retirement resources. Each withdrawal compounds over time, reducing not only current balances but also future growth through lost compound interest.
This dynamic helps explain why economic insecurity in retirement is so persistent. With median wealth for Black households not quite $45,000, Black retirees are forced to rely more heavily on Social Security, often claiming benefits early and locking in lower monthly payments. The result is a cycle in which short-term financial pressures today translate into long-term economic vulnerability tomorrow — further widening the racial wealth gap across generations.
Debt Burdens That Tighten the Margin
Heavy student‑loan and medical‑debt burdens leave many households, especially Black and Hispanic households, with almost no margin for error. When a job loss or health shock hits, tapping retirement savings can feel like the only way to keep up, and recordkeepers report education and medical expenses among the top reasons people request hardship withdrawals.
Not Bad Choices, but Constrained Choices
Hardship withdrawals are often framed as individual mistakes or matters of discipline. But the data tell a different story. For many workers supporting family members, managing student loans alongside medical bills, or losing relatively stable public-sector jobs, tapping a retirement account is often the only option left.
To explore these patterns in your community and build solutions grounded in data, create a free Black Wealth Data Center account.
David Asiamah, Ph.D., is with the Black Wealth Data Center, and Dedrick Asante-Muhammad is president of the Joint Center for Political and Economic Studies.