Average 401(k), IRA balances hit record highs — but more workers are raiding their accounts, Fidelity says

Retirement account balances hit record highs in the second quarter, recovering from a dip at the beginning of the year, according to data published Thursday by Fidelity Investments, the nation's largest provider of 401(k) savings plans.

But there were signs that workers also used their accounts as a piggy bank to ease financial pressures amid a broader affordability crunch, experts said.

The average 401(k) balance rose 13.1% year-over-year to $155,800, an all-time high, according to Fidelity data.

The average individual retirement account balance also gained 10% from a year ago to a record $144,523 in the second quarter, Fidelity found.

Rising balances were buoyed by recent market gains, which followed a selloff earlier in the year sparked by the Iran war.

As of Wednesday's market close, the Dow Jones Industrial Average stock index was up roughly 10% year to date, while the Nasdaq Composite and S&P 500 have each risen more than 12%.

Positive savings behaviors helped, as well. The average 401(k) contribution rate, including employer and employee contributions, held steady at 14.4%, Fidelity found, just shy of Fidelity's recommended 15% annual savings benchmark.

"When you combine positive market performance with steady and consistent savings rates, that's when you see these positive gains," said Mike Shamrell, Fidelity's vice president of thought leadership.

Savers took more 401(k) loans, hardship withdrawals

Still, savers also tapped their accounts to free up cash, a sign of underlying financial stress, experts said.

The share of workers with an outstanding loan in 2026 was 19.5%, up slightly from a year ago, according to Fidelity. About 2.8% of workers also took out a new loan from their 401(k) in the second quarter.

Separately, the share of workers taking a hardship withdrawal also rose year-over-year to 3% from 2.6%, Fidelity found.

A hardship withdrawal can be taken from a retirement plan without paying an early-withdrawal penalty as long as the investor has an "immediate and heavy financial need," according to the IRS, such as avoiding foreclosure, eviction or unforeseen health expenses.

The uptick may be "a sign that household finances are becoming more strained," said certified financial planner Cathy Curtis, founder and CEO of Curtis Financial Planning in Oakland, California.

Higher prices for necessities like groceries and gasoline have been a particular pain point for most U.S. households, against a backdrop of persisting inflationary pressures.

"The No. 1 problem in the U.S. economy right now is inflation," Heather Long, chief economist at Navy Federal Credit Union, said in an email. "Meanwhile, the No. 2 problem in the economy is affordability."

Financial pressures may create a 'cash crunch'

"Everyday expenses, such as housing, utilities, groceries and transportation, have risen significantly over the last few years and if wages haven't kept pace with someone's cost of living, or if their lifestyle has become more expensive, they may find themselves in a cash crunch," Curtis said.

Yet, tapping a 401(k) should be a last resort, said Curtis, a member of the CNBC Financial Advisor Council.

"The biggest downside is that borrowing or withdrawing from a 401(k) disrupts long-term retirement savings," she said.

So-called "leakage" from 401(k) plans — especially cashing out an account before retirement age — jeopardizes the power of compound interest.

However, there is also a "behavioral downside," Curtis added. "Once a 401(k) is utilized for daily expenses, it can be easier to tap it again, further eroding retirement saving."