Over the past five years, the average 401(k) balance was essentially unchanged

Over the past five years, the average 401(k) balance was essentially unchanged, per Fidelity.

Americans are increasingly dipping into their retirement savings to cover housing and medical expenses as living costs rise, as per data released by Fidelity Investments on Monday. The data revealed that 2.3% of workers took a hardship withdrawal last quarter, up from 1.8% a year earlier. The primary reasons cited for this increase were to avoid foreclosure or eviction and to cover medical expenses.

A Federal Reserve study on household finances found that Americans outside the wealthiest quintile have depleted the extra savings generated early in the pandemic and now have less cash on hand than they did when the pandemic began.

In the third quarter, 2.8% of 401(k) retirement account participants took a loan against their account, up from 2.4% in the same quarter of 2022, according to Fidelity. Overall, about 17.6% of workers have an outstanding loan, up from 17.2% last quarter and 16.8% in the third quarter of 2022.

Fidelity conducted the quarterly analysis by reviewing the savings behavior and account balances of more than 45 million retirement accounts. Loans against 401(k) savings typically need to be repaid over as long as five years with interest. However, some workers opt for an in-service withdrawal, which includes taxes and penalties but doesn't require repayment. Last quarter, 0% of participants took an in-service withdrawal, up half a percentage point from a year ago, according to the Fidelity study.

Overall, the average retirement account balance experienced a slight decrease from the previous quarter. The average 401(k) balance was $107,700, down 4% from the second quarter, but it has essentially remained unchanged over the past five years.