Consumers Turn To 401Ks To Make Ends Meet

Worst Personal Finance Trend Just Got Worse

Consumers have been crushed. 

They are getting desperate. 

It will lead to worsening economic conditions. 

And now, a newly released report from one of the world’s largest asset managers shows it might have just gotten even worse. 

Let me explain.
 

Consumers Turn To "Last Resort"

We’ve talked about how consumers have been hit hard. 

They’ve found two ways to temporarily “deal” with soaring inflation – savings and credit cards. 

In Two Troubling Personal Financial Trends Are Accelerating we featured how savings have been decimated and credit card debt is soaring. 

Those trends are continuing, and that’s pretty bad. 

But now there’s another source of cash that shows increasing consumer desperation. 

This data from Vanguard Group, which tracks the activity in five million 401K retirement accounts, shows a painful record has been set. 

This chart from CNBC shows the number of hardship withdrawals has surged to record levels in October:
 

That’s 0.5%, or 1 in 200, that took a withdrawal in October, just to make ends meet. 

That’s the highest rate on record which goes back to 2004. 

But if you look back to the last surge - the pandemic when GDP fell 10% and stocks fell 30% – hardship withdrawals were only half what they were today. 

This is another clear indicator of the destructive force of grinding inflation has on consumers. 

The economy will be impacted. There’s no way it can’t.

And this is further proof the odds are against a quick recession, a resetting, and turnaround.

Instead, a longer and more painful period of economic malaise.