Financial pressures pushed more savers to tap their retirement accounts in the first part of 2026, new data shows — potentially locking in losses during the early weeks of the Iran war.
Amid severe market volatility earlier this year, the average 401(k) balance fell by 4% to $141,000, according to first-quarter data released Thursday from Fidelity Investments, the nation’s largest provider of 401(k) savings plans.
The average individual retirement account balance was also down 4% to $131,380 in the first quarter, Fidelity found.
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 Fidelity Investments. “Luckily, a couple of months later, we are trending in a much better direction,” she said, referring to recent market highs.
After the U.S. and Israel attacked Iran on Feb. 28, the 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%.
Markets have since rebounded from earlier losses. As of Wednesday’s close, the Dow Jones Industrial Average was up roughly 5.3% year to date, while the S&P 500 rose nearly 10% and the Nasdaq Composite gained 14.8%.
More workers are pulling money from their 401(k)s
However, more savers also tapped their accounts to free up cash during this time, which experts say is a sign of underlying financial strain.
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.
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 can be taken from a retirement plan without paying an early withdrawal penalty for an “immediate and heavy financial need,” according to the IRS.
Many households have struggled 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.
In most cases, workers take hardship withdrawals for less than $2,000, Fidelity’s Hunter Peterson said, which is “not so significant.” But some are taking more than one hardship withdrawal in a year, which indicates a more precarious financial position. “Those are the type of savers we want to monitor,” Hunter Peterson said.
A 401(k) hardship withdrawal should be a last resort, according to certified financial planner Douglas Boneparth, president and founder of Bone Fide Wealth, a wealth management firm in New York City. Early withdrawals may trigger taxes and a 10% penalty, but “the long-term compounding loss is even larger,” he said.
“The 401(k)-withdrawal trend … reflects broader pressure across household finances as inflation and elevated living costs continue squeezing consumers,” said Boneparth, a member of CNBC’s Financial Advisor Council.
Plus, pulling money out during a market downturn makes it harder to recoup losses in the long run, financial advisors also say.
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 — such as $25 to $50 a month — into a high-yield savings account as a buffer before cutting retirement contributions, he said.
Meanwhile, the majority of retirement savers continued to contribute during the first quarter, helped by features like auto-escalation, which automatically raises a worker’s savings rate each year, often by a percentage point at a time, Fidelity said.
The average 401(k) contribution rate, including employer and employee contributions, edged up to 14.4%, a record high and just shy of Fidelity’s suggested savings rate of 15%.
“While 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 — an approach that will ultimately strengthen outcomes as retirement nears,” Sharon Brovelli, president of Fidelity’s workplace investing, said in a statement.
