Fidelity, AARP flash warning over 401(k) plans: ‘You could lose 25% to 35%.’ Here’s the big risk Americans face

Fidelity and AARP are warning Americans about the costs of tapping 401(k) accounts early, highlighting that withdrawals before age 59½ can trigger ordinary income tax plus a 10% penalty — effectively costing savers 25%–35% of the withdrawn amount (e.g., a $20,000 withdrawal may net $12,000–$14,000). Data cited include a rise in participants taking hardship or early withdrawals (about 6% in 2025, up from 5% in 2024) and 2.5% facing hardship withdrawals in 2025. The piece stresses the long-term market impact of liquidating retirement assets: lost tax-advantaged compounding and reduced retirement wealth, and it suggests alternatives such as 401(k) loans, building emergency funds, and adding defensive assets like gold. The guidance and data could influence household liquidity choices, demand for safe-haven assets, and longer-term consumption patterns tied to retirement wealth preservation.