- The Washington Times - Friday, December 9, 2022

Inflation and other economic woes are forcing people to save less money and rack up credit card balances. 

Now, finance trackers are noticing another worrying sign: An unusually large share of retirement savers are taking money from their 401(k) plans to cover a hardship.

The Vanguard Group, which looked at data on 5 million savers, said nearly 0.5% of workers in a 401(k) plan took a “hardship distribution” in October, according to CNBC. It is the largest share since Vanguard started tracking the issue in 2004.

The share translated to about 25,000 workers who decided they had an “immediate and heavy” need that required them to dip into the plan before retirement.

Vanguard said the trend remains rare overall and does not reflect the typical retirement saver, though it shows that a greater share of Americans is feeling cash-strapped.

Financial advisers say the practice should be avoided if possible.

CNBC reports that workers under age 59½ often owe a 10% tax on the withdrawal, plus income tax on pretax savings. 

Also, many employers prohibit workers from contributing to their 401(k) for six months after taking a hardship distribution.

• Tom Howell Jr. can be reached at thowell@washingtontimes.com.

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