Why Early 401(k) Withdrawals Are Rising in 2025—and What You Can Do About It

At Peregrine Financial, we’re keeping a close eye on a troubling economic trend: more Americans are withdrawing from their 401(k) retirement accounts early, often at significant financial cost.

Early 401(k) Withdrawals Are Surging

According to Empower, the second-largest retirement plan provider in the U.S., early withdrawals from 401(k)s are currently running 15% to 20% above historical averages. A recent report from Vanguard shows that 4.8% of account holders took early withdrawals in 2024, up from 3.6% in 2023 and just 2% during the pandemic.

Most early withdrawals are triggered by financial hardship—people using their retirement funds to cover urgent needs such as medical bills, mortgage payments, or avoiding foreclosure. For individuals under 59½, these withdrawals typically come with a 10% penalty, further eroding their long-term savings.

What This Means for Retirement Savers

This trend reflects a broader financial squeeze on American households, especially those with limited emergency savings. While accessing retirement funds in a crisis can provide short-term relief, it can also jeopardize future financial security.

How a Self-Directed IRA Can Help

One way to build more flexibility into your retirement strategy is by opening a Self-Directed IRA. Unlike traditional retirement accounts that are limited to stocks, bonds, and mutual funds, a Self-Directed IRA lets you invest in:

• Real estate

• Private equity or private lending

• Precious metals like gold or silver

• Startups and other alternative assets

This type of account can help you diversify your portfolio and better weather uncertain times, without sacrificing long-term growth.

Take Action with Peregrine Financial

If you’re concerned about how inflation, rising debt, or economic uncertainty could impact your retirement, now is the time to explore smarter strategies. At Peregrine Financial, we can walk you through the benefits of Self-Directed IRAs and help you make informed decisions for your future.

Contact us today to schedule a free consultation and start building a more resilient retirement plan.