Financial Strain on the Rise: 

Payroll Integrations' 2025 Employee Financial Wellness report reveals a workforce under mounting financial pressure. Many employees are tapping into retirement savings as a lifeline, with 38% of workers stating they have withdrawn funds from their retirement accounts at some point.

Such widespread withdrawals point to systemic financial insecurity, as workers cope with emergencies and high living costs in the face of insufficient safety nets. This trend cuts across demographics but is most acute among younger employees: nearly half of Gen Z workers (46%) have already dipped into retirement savings (versus 31% of Millennials). Crucially, these withdrawals are driven by urgent needs (not luxury spending): 37% of all withdrawals cover unexpected emergencies, and 42% of Gen Z withdrawals went toward paying off debt.

Alarmingly, this pattern is poised to continue, with one in three employees planning to raid retirement funds in the next year (often for emergencies or day-to-day expenses)–a sign of persistent financial fragility.

Reasons for Retirement Fund Withdrawals

Among employees who dipped into retirement savings this year, 37% used the funds to cover unexpected emergency expenses, such as major home or car repairs. This indicates that for many, a 401(k) or similar account has become an emergency fund of last resort.

Additionally, a significant share of younger employees are using withdrawals to manage debt – 42% of Gen Z who took out retirement money did so to pay off debt. By comparison, 6% of Millennials, 17% of Gen X and 0% of Boomers cited debt repayment as their reason, showing that this is disproportionately a Gen Z issue. These stats underscore that financial insecurity, not lack of discipline, is driving the behavior. Workers are encountering expenses or debt loads they can’t handle with regular income or savings, so they resort to raiding retirement funds, potentially incurring penalties or losses just to stay afloat.