401(k)s Become a Lifeline as More Americans Face Cash Crunch

Many U.S. workers chose to tap into their retirement accounts to manage their household finances in the first quarter of this year. An increase in the number of consumers turning to their retirement plans, including a 401(k) or IRA, for cash is a sign of underlying financial pressure, according to a new report from CNBC. 

Fidelity’s 2026 State of Retirement Planning Study found that average balances on 401(k) accounts shrank by 4% last quarter. And average balances on individual retirement accounts went down by the same amount for the period.

Investment markets have been choppy this year in part due to the U.S.-Israeli conflict with Iran and its effect on the price of goods, including gasoline.

In March, the S&P 500 had its worst performance in a month since 2022, CNBC said. And that may have given people confidence that drawing from their retirement accounts early was a good idea. 

The S&P 500 is up on the year after a tumultuous March.

But the problem with withdrawing funds from a retirement account soon after it’s had a drop in value is that the investor may miss out on a market recovery that can follow a downturn.

Kirsten Hunter Peterson, Vice President of Workplace Thought Leadership at Fidelity Investments, said in a CNBC report that the outbreak of the war in Iran led to a stock sell-off.

“Luckily, a couple of months later, we are trending in a much better direction,” she noted.

As of June 1, the S&P 500 is up approximately 11% on the year.

Retirement Goals Can Slip Away

Many investment advisors caution people opening a retirement account to leave their funds in it as the market fluctuates.

“Historically, a large share of the stock market’s gains and losses occur in just a few days of any given year,” a post on U.S. Bank’s wealth management site shares. “Since the pattern of returns isn’t predictable from month to month, a consistent investment can add to your bottom line.” 

Nevertheless, a person who hasn’t built up an emergency savings account may be tempted to draw from their retirement account — and stop contributing to it — when their checking account is dwindling.

For people with bad credit, the pressure to withdraw funds early from a retirement vehicle may be stronger. That’s because those consumers may not have affordable access to products such as personal loans and lines of credit that would help them weather a financially rocky time.

The CNBC report indicates that 19.2% of workers had an outstanding loan from their 401(k) at the close of the first quarter in 2026, up from 18.8% in the same period a year earlier. 

Putting money aside for retirement on a regular basis requires financial discipline. And not withdrawing those funds when finances get tight may require even more.

Fidelity data found that nearly 1 in 3 respondents said they aren’t sure when, or whether, they’ll retire; among that group, 42% said they don’t think they’ll be able to afford to.

Workers who dip into their retirement savings time and again to cover immediate expenses may find retirement on their preferred schedule increasingly out of reach.