As revealed in a new quarterly survey from Fidelity Investments, at an increasing rate people have been accessing their 401(k) accounts to make hardship withdrawals. The increasing rates of withdrawals underscore the need to help people boost their emergency savings, the financial firm says. Hardship withdrawals are only available to workers who are experiencing an “immediate and heavy” financial need, including medical and dental expenses, avoiding foreclosure or eviction, funeral expenses, fixing a damaged primary residence, tuition, the purchase of a primary residence, or expenses caused by a natural disaster. Despite recent attempts by the White House to downplay soaring inflation, everyday Americans are feeling the impact of higher costs across multiple sectors of the economy. According to the latest data from the Bureau of Labor Statistics, year-over-year costs have risen for food, gasoline, electricity, medical care, shelter, transportation, recreation, and education. Among respondents in Fidelity’s survey, 74 percent say that inflation is causing them stress. Additionally, 31 percent say that inflation is impacting their ability to concentrate at work. More than half (56 percent) of employees said they would feel somewhat or completely overwhelmed if an unexpected financial challenge came up. “We did have a little bit of market uncertainty in Q3, which contributed to the balances being down a bit for the quarter,” said Mike Shamrell, vice president of thought leadership for Fidelity’s workplace investing division. He noted that despite more people taking withdrawals, the total savings rate — a combination of employee and employer contributions — for the third quarter increased 13.9 percent from the same period last year. “We found that people are still contributing consistently to their retirement accounts,” Shamrell said. “We did not see people pulling back on their contribution rates.” Fidelity advises people to tackle inflation by cutting spending, bring in additional income (take on a new job), focus on building an emergency fund, and trying to invest with cash on hand.A growing number of Americans are tapping into their retirement savings to make ends meet as inflationary pressure continues to drive up costs for essentials.
