A third of Americans with heavy debt have raided their retirement accounts to pay it off

About one-third of Americans carrying significant unsecured debt pulled money from a retirement account in the past year to pay it down, according to a 2026 survey from Freedom Debt Relief and Money.com. The 1,800 respondents all had at least $10,000 in unsecured debt; withdrawing from a 401(k) or IRA was about as common as using a budgeting app, and more common than enrolling in a credit counseling agency's debt management plan, which 25% of respondents had tried.

The move carries a real cost beyond the immediate payoff: withdrawals before age 59 ½ typically trigger income taxes plus a 10% early withdrawal penalty, on top of losing years of investment growth. J.P. Morgan Asset Management found that missing just the 10 best days for the S&P 500 between 2006 and 2025 would have cut the returns on a $10,000 investment by more than half, leaving an investor with $35,866 compared with $80,619 for someone who stayed fully invested.

Financial advisers quoted in the report called retirement withdrawals a last resort, warning that the underlying spending habits that created the debt often go unaddressed, leaving people back in debt after draining their savings.