Bank of America has released data that shows more Americans are turning to their 401(k) accounts for financial assistance. The number of people making hardship withdrawals in Q2 increased by 36% compared to the same period in 2022.
Long-term costs of these withdrawals can be high.
The report found that a greater percentage of participants borrowed from their workplace plans and average contributions decreased.
However, overall employee contributions remained steady through June, and more participants increased their contribution rate than decreased it.
BoA's report highlights two contrasting stories: Balance growth and optimism from younger employees, and increased plan withdrawals.
Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, stated that more employees are prioritizing short-term expenses over long-term saving.
Household finances have been impacted by the global pandemic and two years of high inflation.
Household debt balances have increased by nearly $3T since 2019, and US households' credit card debt exceeded $1T for the first time ever.
There is concern that these debt levels could lead to financial difficulties if individuals face unexpected expenses or changes in their financial situation. (Press Run Down 08/07/23) Americans are rapidly withdrawing funds from their 401(k)s (pressrundown.com)
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