American workers may be cutting back on 401(k) retirement contributions to cover rising living costs, a new report suggests.
In a TIAA survey, 43% of Americans said they have cut back on retirement contributions or stopped them entirely in the past year to keep up with daily expenses. Only 7% said they have increased retirement contributions in the past 12 months.
More worrisome, perhaps, 12% of Americans said they have taken early withdrawals from retirement accounts to cover living costs, racking up penalties in the process.
The findings come from a report titled Stretched Thin: Where Americans Stand on Affordability, Retirement, and Social Security, released Oct. 26 by TIAA. It draws from a July survey of 1,000 adults.
The survey suggests five
years of cumulative inflation may be finally catching up with America's retirement savers. Consumer prices have risen nearly 30% since the start of 2021.
One TIAA researcher drew a parallel between the current inflation arc and the COVID-19 pandemic, an episode that prompted hardship withdrawals from retirement plans. A temporary policy shift waived early withdrawal penalties in 2020.
“I think we are again in another acute situation, with inflation hitting us really hard,” Surya Kolluri, head of TIAA Institute, a research arm of the retirement services provider.
“And this time, the government has not given us permission without penalty to take out of 401(k)s, so people are doing the next best thing.”
The next best thing, in this case, is to scale back contributions to a 401(k) account, diverting the funds toward more urgent needs, such as housing or health care.
“Honestly, it’s a rational response,” Kolluri said. “Let’s take the simple case of, ‘I have to pay the mortgage, and I have to contribute to my retirement, and I’m in a pinch. I have no freedom on the one. I have lots of freedom on the other.’”
Have 401(k) savings rates plateaued?
The survey findings are surprising, because 401(k) contributions have generally been rising. The median Vanguard retirement saver contributed 6.6% of income to a 401(k) in 2025, up from 6.1% in 2020, the retirement plan provider reports.
But median contribution rates have ticked down slightly in the last few years, from a peak of 6.8% in 2023.
And retirement savers are making hardship withdrawals at progressively higher rates. The share of Vanguard retirement savers taking withdrawals to cover urgent financial needs rose from 2% in 2020 to 6% in 2025.
Those signs of financial fragility often get overlooked, because 401(k) participation is generally rising, as are average account balances.
But other recent reports have uncovered evidence that workers are struggling to save for retirement during a prolonged span of elevated inflation.
A 2025 report from Dayforce, the human capital management company, found that only top earners are increasing their retirement contributions from year to year.
The study found average retirement savings rates dwindled between 2022 and 2024 for every group of earners except the top tier. Among those earning $15,000 to $50,000, for example, the average retirement savings rate declined from 4.9% to 4.6% of income, less than half the savings rate for top earners.
Vanguard, Fidelity report strong retirement savings rates
Spokespeople for two top retirement plan providers, Vanguard and Fidelity, said they have not seen recent evidence of retirement savers pulling back on contribution rates.
“Across our platform, only 10.3% of participants decreased their contribution rate over the past 12 months,” said Kristen Andrews, a Fidelity spokesperson. “Only 1.5% stopped altogether.”
Through the second quarter of 2026, Fidelity reports, total average 401(k) savings rates stood at a record level, a combined average employee and employer contribution rate of 14.4%.
Among Vanguard retirement savers, 45% increased their contribution rate in 2025, the company said, while 8% decreased their saving rate and 2% stopped contributing altogether.
Each company’s data is limited to the retirement plans it administers.
In the TIAA survey, 24% of Americans nationwide said they had cut back on retirement contributions in the past year, while 19% said they had stopped making contributions.
Eighty percent of Americans surveyed by TIAA said they see inflation as a threat to their retirement. Nearly half said they had taken one or more of these steps to cope with rising prices:
- 22% took a second job or side hustle
- 14% delayed their planned retirement age
- 12% took an early withdrawal from a retirement account
- 9% borrowed against a 401(k)
“We’ve spent decades not thinking about inflation,” Kolluri said, “but it’s right in front of us, and we’re learning to deal with it.”
This article originally appeared on USA TODAY: Is inflation finally forcing Americans to cut back 401(k) savings?
