More Workers Dipped Into Their Retirement Savings Last Year, Vanguard Finds

The percentage of retirement plan participants taking hardship withdrawals increased in 2024, according to new research from Vanguard.

In a preview of its How America Saves 2025 report, which surveyed data from nearly five million defined contribution plan participants, Vanguard found that 4.8 percent of DC plan members withdrew funds due to financial hardship, up from 3.6 percent in 2023.

The increase comes as more plans incorporate automatic enrollment, expanding access to workplace savings for lower-income workers who may have fewer financial reserves outside of retirement accounts.

Despite the uptick in withdrawals – at least some of which might have been due to elevated inflation – Vanguard noted that loan issuances remained stable and below pre-pandemic levels, suggesting that most participants continue to take a long-term approach to saving.

“While hardship withdrawals increased in 2024, it’s important to note that less than 5 percent of the participant population took one,” the preliminary report stated. “For a small subset of workers facing financial stress, hardship withdrawals may serve as a safety net that otherwise may not have been available without plan-implemented automatic solutions.”

The report also found that average participant account balances rose 10 percent over the year, reaching $148,153 by the end of 2024. The median balance increased 8 percent to $38,176.

Vanguard said gains in DC plans last year were driven in part by strong equity market performance. The S&P 500 surged by 25 percent in 2024, while the bond market posted a modest 1 percent gain. Despite last year's market rally, the report suggested a largely "set it and forget it" attitude among non-advised participants, with only 5 percent making trades – consistent with record-low levels of exchange activity in 2023.

“The use of professionally managed allocations has dramatically improved participants’ age-appropriate equity exposure,” the report stated.

On top of market gains, higher savings rates contributed to account balance growth. Vanguard reported that 45 percent of participants increased their deferral rates, the highest percentage since tracking began in 2019.

A major driver of this increase was automatic escalation features, which raised contributions for 29 percent of participants without requiring them to take action. The report found that workers enrolled in both automatic enrollment and escalation features tend to save 20 to 30 percent more after three years than those who only have automatic enrollment.

“Growing adoption of automatic enrollment and improvement in plan designs over the last two decades has helped increase employee savings,” the report stated.

That echoes recent research by Fidelity, which found employers played a key role in supporting workers' savings through auto-enrollment and auto-escalation features.

As of 2024, Vanguard said three-fifths (61 percent) of plans it offers used automatic enrollment, compared with 36 percent a decade ago. The trend was stronger among larger plans with at least 1,000 participants, where 78 percent have adopted this feature.

Vanguard also noted that seven in ten plans with automatic enrollment now include automatic escalation, which gradually increases employee deferral rates over time. The report suggests that plan sponsors not yet offering these features may want to consider their impact on long-term savings outcomes.