Financial pressures pushed more savers<\/a> to tap their retirement accounts in the first part of 2026, new data shows \u2014 potentially locking in losses during the early weeks of the Iran war<\/a>.<\/p>\n Amid severe market volatility<\/a> earlier this year, the average\u00a0401(k)<\/a>\u00a0balance fell by 4% to $141,000, according to first-quarter data released Thursday from\u00a0Fidelity Investments<\/a>, the nation\u2019s largest provider of 401(k) savings plans.<\/p>\n The average\u00a0individual retirement account<\/a>\u00a0balance was also down 4% to $131,380 in the first quarter, Fidelity found.<\/p>\n The drop was due to the outbreak of the Iran war, which sparked a stock selloff, according to Kirsten Hunter Peterson, vice president of workplace thought leadership at\u00a0Fidelity Investments. \u201cLuckily, a couple of months later, we are trending in a much better direction,\u201d she said, referring to recent market highs<\/a>.<\/p>\n<\/div>\n After the U.S. and Israel\u00a0attacked Iran<\/a> on Feb. 28,\u00a0the S&P 500 lost 5.1% in March for its worst monthly performance since 2022. The Dow dropped 5.4%, snapping a 10-month winning streak. The Nasdaq declined 4.8%.<\/p>\n Markets have since rebounded from earlier losses. As of Wednesday\u2019s close, the\u00a0Dow Jones Industrial Average<\/a>\u00a0was up roughly 5.3% year to date, while the S&P 500 rose nearly 10% and the\u00a0Nasdaq Composite<\/a>\u00a0gained 14.8%. <\/p>\n<\/div>\n However, more savers also\u00a0tapped their accounts<\/a>\u00a0to free up cash during this time, which experts say is a sign of underlying financial strain.<\/p>\n The share of workers with an outstanding loan at the end of the first quarter of 2026 was 19.2%, up slightly from 18.8% a year earlier, according to Fidelity. About 2.4% of workers took out a new loan from their 401(k) in the first quarter, up from 2.3% in 2025.<\/p>\n The share of workers taking a hardship withdrawal, which is broken out separately, also rose year over year to 2.5% from 2.3%, Fidelity found. A hardship withdrawal<\/a> can be taken from a retirement plan without paying an early withdrawal penalty for an \u201cimmediate and heavy financial need,\u201d according to the IRS.<\/p>\n<\/div>\n Many households have struggled<\/a> in the face of rising prices for necessities like groceries and gas due to the Iran war. As a result, consumers have had less room in their budgets to cover an unexpected expense or emergency, experts say. <\/p>\n In most cases, workers take hardship withdrawals for less than $2,000, Fidelity\u2019s Hunter Peterson said, which is \u201cnot so significant.\u201d But some are taking more than one hardship withdrawal in a year, which indicates a more precarious financial position. \u201cThose are the type of savers we want to monitor,\u201d Hunter Peterson said. <\/p>\n A 401(k) hardship withdrawal should be a last resort, according to certified financial planner\u00a0Douglas Boneparth<\/a>, president and founder of Bone Fide Wealth, a wealth management firm in New York City. Early withdrawals may trigger taxes and a 10%\u00a0penalty<\/a>, but \u201cthe long-term compounding loss is even larger,\u201d he said.<\/p>\n<\/div>\n \u201cThe 401(k)-withdrawal trend \u2026 reflects broader pressure across household finances as inflation and elevated living costs continue squeezing consumers,\u201d said Boneparth, a member of\u00a0CNBC\u2019s Financial Advisor Council<\/a>.<\/p>\n Plus, pulling money out<\/a> during a market downturn makes it harder to recoup losses in the long run, financial advisors also say.<\/p>\n The households best positioned to weather sudden affordability challenges are the ones with even a modest emergency cushion, Boneparth said. If monthly cash flow is tight, redirect a small amount \u2014 such as $25 to $50 a month \u2014 into a high-yield savings account as a buffer before cutting retirement contributions, he said.<\/p>\n<\/div>\n Meanwhile, the majority of retirement savers\u00a0continued to contribute<\/a> during the first quarter, helped by features like auto-escalation<\/a>, which automatically raises a worker\u2019s savings rate each year, often by a percentage point at a time, Fidelity said.\u00a0<\/p>\n The average 401(k) contribution rate, including employer and employee contributions, edged up to 14.4%, a record high and just shy of Fidelity\u2019s suggested savings rate of 15%.<\/p>\n \u201cWhile it can be tempting to make changes to retirement savings during market volatility, it is positive to see participants stay the course with their contributions \u2014 an approach that will ultimately strengthen outcomes as retirement nears,\u201d Sharon Brovelli, president of Fidelity\u2019s workplace investing, said in a statement.<\/p>\n Subscribe to CNBC on YouTube.<\/strong><\/em><\/a><\/p>\n<\/div>\nRead more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
More workers are pulling money from their 401(k)s <\/h2>\n
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