Financial Distress Fuels Rise In 401(k) Hardship Withdrawals

A recent report from Bank of America
BAC
found that a growing number of Americans are resorting to hardship withdrawals from their 401(k) accounts, signaling financial distress is on the rise. Hardship withdrawals refer to funds withdrawn from an individual’s 401(k) account due to immediate and heavy financial need. Federal law states these withdrawals are taxed and cannot be repaid into the account.

The second quarter of 2023 saw a surge in the number of people resorting to hardship withdrawals. This increase is 36% higher than the same period the previous year, according to data from Bank of America.