New data released this week show retirement accounts finished 2025 stronger than a year earlier, but the improvement masks a worrying trend: more savers are withdrawing or borrowing from their plans. That split — market-driven gains alongside rising account “leakage” — has direct implications for anyone relying on workplace retirement savings today.
Balances rose, helped by market rally and steady saving
Fidelity and Vanguard reports published Wednesday found that average retirement balances climbed in 2025, driven largely by stock-market gains and continued contributions.
Fidelity’s numbers show the typical 401(k) balance increased by about $14,700 last year to roughly $146,400, an 11% jump from 2024. Individual retirement accounts also grew, with the average IRA rising to about $137,095 — up nearly 7% year over year.
Vanguard reported a broader uplift across plans, estimating the average retirement account at about $167,970 at year-end and calculating a roughly 13% increase in balances overall.
| Measure | 2025 figure | Change vs. 2024 | Source |
|---|---|---|---|
| Average 401(k) balance | $146,400 | +11% | Fidelity |
| Average IRA balance | $137,095 | +7% | Fidelity |
| Average account across plans | $167,970 | ~+13% | Vanguard |
| Average contribution rate (employer + employee) | 14.2% | — | Fidelity |
Markets helped substantially. The S&P 500 delivered another strong year — adding double-digit gains for a third straight year — while the Nasdaq and Dow also posted healthy returns that lifted retirement portfolios. At the same time, average contribution rates remained close to Fidelity’s recommended target, signaling that many workers continued to put money aside.
But borrowing and hardship withdrawals are rising
Despite healthier balances, more participants dipped into their retirement accounts to cover short-term needs. That behavior reduces the long-term benefit of compounding returns and can erode future retirement income.
Key indicators of plan “leakage” rose in 2025:
- Workers with an outstanding 401(k) loan: about 19.4% (up from 18.9% in 2024).
- New 401(k) loans taken in 2025: roughly 9% (slightly below 2024’s 9.5%).
- Participants taking a formal hardship withdrawal: Fidelity reports 2.7% in 2025 versus 2.5% the prior year; Vanguard’s data show a larger share — roughly 6% — reaching a record high.
Financial advisers warn that tapping retirement accounts today can mean smaller nest eggs later. Withdrawals and loans interrupt compounding gains and, depending on the type of withdrawal, can carry taxes and penalties.
Mike Shamrell, Fidelity’s vice president of thought leadership, said the rise in balances reflects both market returns and positive savings habits, but he acknowledged the increase in borrowing and hardship claims as a sign of underlying stress in some households.
That tension — portfolios up, but more people accessing funds early — matters for readers because it changes retirement timelines and the amount families may need to save going forward. Short-term relief can translate into long-term shortfalls, particularly for younger workers who lose years of potential growth.
What readers should watch next
With markets and geopolitics continuing to create volatility, the trend of higher account balances paired with increased withdrawals bears close monitoring. Policymakers and plan managers are watching the same signals: stronger aggregate savings but persistent pockets of financial fragility.
If you’re tracking your own retirement progress, pay attention to contribution rates, employer matches, and any loans or withdrawals. Even modest changes in behavior today affect retirement outcomes over decades because of the power of compound interest.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.