Divorce Is the Biggest Predictor of Early 401(k) Withdrawals, New Research Shows

Marital status turns out to be one of the strongest predictors of early 401(k) withdrawals. According to the latest research from the National Institute on Retirement Security, an average of 8.9% of divorced, widowed, or separated workers withdrew from their defined-contribution retirement accounts in 2022 — more than double the 3.9% rate among married workers. When they did withdraw, they also took more out: an average of 23.1% of their account balance, versus 17.8% for married workers. Divorce specifically opens a penalty-free path that a typical early withdrawal doesn’t have — a Qualified Domestic Relations Order lets a former spouse claim a share of the account without triggering the usual 10% early-withdrawal penalty.

Age plays a different role than balance size might suggest. Workers 55 to 64 were the most likely age group to withdraw at all, but tended to take the smallest share of their balance when they did, since older workers generally have more saved. Younger workers withdrew less often but pulled a larger percentage when they did. Divorced, widowed, and separated workers also tend to have thinner cash reserves to fall back on — a median bank balance of about $3,000, compared with $7,000 for married workers — which helps explain why retirement savings become the fallback during a period of financial strain.

The cost compounds beyond the amount withdrawn. Taking 20% from a $40,000 balance — the study’s median for workers with positive savings — isn’t just an $8,000 hit; at a hypothetical 7% average annual return, that $8,000 would roughly double in value every decade it stayed invested instead. None of this is a judgment on anyone forced into that decision under real financial pressure. It’s simply the case for building an emergency reserve, and understanding alternatives like a 401(k) loan, well before a major life event forces the choice on worse terms.