Retirement account balances grew in 2025, but more workers withdrew funds for hardship reasons, signaling financial stress beneath the surface. President Donald Trump highlighted the increase in 401(k) balances during his recent State of the Union address, noting that typical account values rose by at least $30,000 since he took office.
According to new data released by Fidelity Investments, the average 401(k) balance ended 2025 at $146,400, up 11 percent from the previous year. Individual retirement accounts (IRAs) also saw growth, with average balances rising seven percent to $137,095. The increase came thanks partly to strong market performance, with the S&P 500 reaching its third consecutive year of gains and the Nasdaq and Dow also posting sizable advances.
Fidelity’s vice president of thought leadership, Mike Shamrell, said positive savings habits helped push balances higher. The average combined employee and employer contribution rate to 401(k) plans was 14.2 percent, just below Fidelity’s recommended 15 percent rate.
Despite the rising balances, the share of workers taking hardship withdrawals from their retirement accounts ticked up. Nearly 2.7 percent of 401(k) participants took hardship withdrawals last year, compared with 2.5 percent in 2024, according to Fidelity. Vanguard’s report showed an even higher percentage, finding that about 6 percent of workers made hardship withdrawals in 2025, a new record.
Fidelity also reported that 19.4 percent of workers had an outstanding loan against their 401(k) accounts, up from 18.9 percent in 2024. Meanwhile, about 9 percent of workers took new loans from their plans, slightly below the prior year’s 9.5 percent.
Experts caution that tapping retirement savings early can harm long-term financial security. Withdrawing funds reduces the power of compound interest and can create "leakage" that jeopardizes a secure retirement. Shamrell expressed hope that hardship withdrawals would decline and pointed to ongoing focus by savers to stay on track despite market volatility and geopolitical tensions, including the conflict between the U.S. and Iran.
The data indicate two trends working in opposite directions: retirement savings are growing on average, helped by market gains and steady savings, but more workers face financial hardship that prompts them to access their retirement funds before reaching retirement age. This mixed picture suggests some households are managing well while others encounter cash flow difficulties.
As retirement accounts continue to show gains, financial advisors recommend maintaining contributions and avoiding early withdrawals to preserve future retirement security. Experts also encourage workers to explore other sources of emergency funds before turning to their 401(k)s.
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