More Americans are tapping their 401(k) accounts because of financial distress, according to Bank of America data released Tuesday.
The number of people who made a hardship withdrawal during the second quarter marched higher from the first three months of the year to 15,950, an increase of 36% from the second quarter of 2022, according to Bank of America's analysis of clients' employee benefits programs, which are comprised of more than 4 million plan participants.
Bank of America's latest Participant Pulse report also found that a greater percentage of participants borrowed from their workplace plans from the first quarter, and average contributions trailed off as well.
However, overall employee contributions continued to hold steady for the first half of the year, and a greater share of participants upped their contribution rate than decreased it.
"The data from our report tells two stories — one of balance growth, optimism from younger employees and maintaining contributions, contrasted with a trend of increased plan withdrawals," Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, said in a statement. "This year, more employees are understandably prioritizing short-term expenses over long-term saving."
While the labor market remains strong, the economy is growing and consumers are spending, the global pandemic followed by two years of persistently high inflation have taken their toll on household finances.
Since 2019, household debt balances have increased by nearly $3 trillion, according to New York Federal Reserve data through the first quarter of 2023.
The New York Fed's latest household debt survey data is set to be released at 11 a.m. ET on Tuesday.
This story is developing and will be updated.
