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Vanguard data shows that the average balance of employer-sponsored retirement plans, including 401(k)s and 403(b)s, dropped by nearly $30,000 to $112,572 in 2022.
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Approximately one-third of account holders had balances below $10,000, while only 12% maintained balances of $250,000 or higher.
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Amidst rising inflation, more Americans resorted to accessing their 401(k) funds for emergencies, resulting in a 2.8% hardship withdrawal rate in 2022, up from 2.1% in 2021.
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"Hardship" withdrawals enable workers to use their 401(k) savings for urgent expenses, but they are subject to income tax and potential penalties.
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Inflation concerns continue to grow as the Consumer Price Index rose 4% in May 2023, double the Federal Reserve's 2% target, further burdening Americans financially.
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To meet essential needs, households increasingly rely on savings and accumulate credit card debt, leading to overall household debt reaching $17 trillion in early 2023.
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Federal Reserve data reveals a rising number of households falling behind on loan payments, underscoring the strain imposed by challenging economic conditions.
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