401k Hardship Withdrawals Hit Record High in 2022
- January 3, 2023
- Phil Cannella
- 0 Comments
New data from the investment firm Vanguard shows that more Americans than ever before are taking hardship withdrawals from their 401k plans. In October 2022, the percentage of 401k plan participants who withdrew money from their accounts due to immediate financial need reached its highest peak since Vanguard began tracking this number in 2004. This is a bad sign for the next generation of retirees, as the money in their 401k plans is meant to provide them with income in retirement. When money that is meant for retirement is used to deal with an immediate financial crisis, it could force someone to delay their retirement or accept a lower standard of living during their golden years.
If you are concerned about financial difficulties wiping out your retirement savings, there are safer ways for you to invest your money, while still having access to your funds when you need them. Read on to find out more about retirement saving strategies that can allow you to leave the money in your 401k untouched while still having access to cash during a crisis.
What is a 401k Hardship Withdrawal?
In most cases, withdrawing money from your 401k before the age of 59½ would result in a 10% early withdrawal penalty; however, the IRS may waive this penalty if you can demonstrate an “immediate and heavy” financial need to yourself, or in some cases, your spouse, dependent, or beneficiary. These immediate and heavy financial needs can include:
- Some medical expenses
- Expenses related to buying a principal residence
- Up to one year of tuition and fees
- Preventing foreclosure or eviction
- Funeral expenses
- Certain expenses related to repairing a principal residence after a loss, such as a fire, earthquake, or flood
While hardship withdrawals are a vital lifeline for some Americans experiencing difficult life events, they should only be used in case of a true emergency. 401k plans, especially those that offer matching employer contributions, are one of the primary methods Americans use to build a healthy nest egg and letting those funds grow untouched until retirement is always advisable.
Retirement Investing with a Plan for Emergencies
Poor economic conditions made 2022 one of the most difficult times in history to save for retirement. Rampant inflation, high housing prices, and skyrocketing medical costs caused retirement investors to have less discretionary income available to put into their nest eggs. Smart investors will be looking for a way to save for retirement that will allow them to have access to their money in case of an emergency. The Crash Proof Vehicles employed in the Crash Proof Retirement® System can do exactly that.
Not only do the Crash Proof Vehicles have the ability to provide guaranteed income for retirement, many of them also contain features that allow an investor to access some or all of their money in the event of an emergency or health-related challenge. Many Crash Proof Vehicles even allow a 10% penalty-free withdrawal every year, without the need to demonstrate financial hardship. Taking advantage of features like these can give you the flexibility to be prepared for unexpected expenses, while letting your 401k funds grow untouched. Doing so will also prevent any worries about early withdrawal penalties to the IRS.
If you are interested in finding out more about how Crash Proof Vehicles can fit into your retirement plan, the first step starts with getting educated. At Crash Proof Retirement®, our licensed retirement educators are happy to give you all the information you need to incorporate Crash Proof Vehicles into your retirement strategy, plus a variety of other tips you won’t hear from traditional financial planners in Bucks County. Call 1-800-722-9728 to schedule your free financial checkup today so you can learn how to save for retirement while still having a backup plan for emergencies or visit crashproofretirement.com for more information.
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