The number of 401(k) participants taking loans or hardship withdrawals has significantly jumped over the past year. According to Fidelity Investments, approximately one in four workers – 22 percent of the workforce – has taken out a loan against their 401(k) plan. Not only are Americans taking out loans against their retirement savings accounts, they are also making an increasing amount of hardship withdrawals.
A hardship withdrawal is an emergency withdrawal from a retirement account, generally used to avoid foreclosure, pay a large medical bill or fund a child’s college education. Fidelity Investments also reported, 45 percent of those surveyed who made a hardship withdrawal last year took another one this year. The average age of people taking hardship withdrawals is between 35 and 55, which means they are withdrawing in their peak earning years.