Workers Tap Retirement Accounts as Financial Pressures Mount

Economic pressures are prompting more employees to tap their retirement savings for short-term financial needs — a sign that many workers continue to struggle with the cumulative effects of rising inflation, depleted savings, and broader economic uncertainty. 

Nearly 2 in 10 workers (19.2%) had an outstanding 401(k) loan at the end of the first quarter of 2026, up from 18.8% a year earlier, according to new data released by Fidelity Investments. About 2.4% of workers took out a new loan from their 401(k) in the first quarter, up from 2.3% in 2025. 

The share of workers taking a hardship withdrawal also rose year over year to 2.5% from 2.3%, Fidelity found. 

Meanwhile, account balances dipped slightly in the first part of the year: The average 401(k) balance with Fidelity Investments fell by 4% from the end of last year to $141,000, while the average 403(b) balance dipped 3% to $130,000. 

The data underscores the difficult balancing act many workers are facing between managing short-term financial needs and saving for long-term retirement security. Employee financial confidence has been rocked by sustained elevated inflation, high gas prices driven by the Iran war, and economic uncertainty and job insecurity. Employee financial confidence dropped to the lowest level in years, according to recent data from insurance firm MetLife. 

As a result, many employees are focused more on meeting immediate financial obligations rather than prioritizing retirement savings, explained Jason Rahlan, global head of sustainability and impact at Dayforce in New York City. 

“The costs of everyday life, such as housing, groceries, and gas, have remained elevated, and for many in the workforce, something has to give,” Rahlan said. “Retirement savings is where a lot of folks are turning to.” 

Separate findings from Dayforce recently showed that one in four full-time workers reduced their annual savings in their 401(k) or other types of employer-sponsored accounts in 2025. 

Those financial decisions may ultimately create ripple effects inside the workplace as well.  

“When workers cut contributions or borrow against their retirement, that financial stress isn’t just being experienced at home. It’s also showing up at work, and the negative effects can and do compound over time,” Rahlan said. 

Employer Role 

For employers, the data signals that workers may need additional support — both through workplace benefits and through more frequent communication and education around retirement savings habits. 

In fact, twice as many U.S. workers are now looking to their employers for guidance and resources related to near-term financial needs compared to two years ago, according to other findings from Bank of America. 

Bank of America found that 26% of the workforce is seeking help in areas such as emergency savings, paying down debt, and overall financial wellness, compared to 13% in 2023. Employees also said they are looking for financial wellness resources revolving around retirement education and planning (36%), learning how to generate income in retirement (33%), and developing good financial skills and habits (33%). 

Benefits that provide employees with more immediate financial stability — such as emergency savings accounts, financial literacy training, and broader financial wellness programs — may help reduce the need for workers to borrow from or withdraw money from their retirement accounts. 

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Experts also say employers should continue reinforcing the importance of maintaining long-term retirement savings habits, even during periods of market volatility when employees may feel anxious watching account balances fluctuate. 

“Volatility is uncomfortable, and it is natural to feel anxious,” said Dan Guhl, private wealth adviser at Northwestern Mutual and partner at Prescient Financial Solutions in Milwaukee. “But reacting emotionally can lock in losses.” 

One of the most important messages employers can communicate, experts say, is that workplace retirement plans are designed as long-term investment vehicles — not short-term financial safety nets.  

“Retirement security is built on consistency,” Rahlan said. “The workers who come out ahead are almost always the ones who stayed the course, kept contributing even when it felt hard, and didn’t let short-term volatility change long-term habits.”