Employees tapping retirement funds amid financial strain, led by Gen Zs

There’s a growing crisis in employee financial wellbeing, with a significant number of workers feeling pressured to withdraw funds from their retirement savings.

A new report reveals that 38% of employees have already tapped their retirement funds, and another 33% plan to do so in the next year. And while this is seen across all demographics, it is particularly acute among younger workers with almost half of Gen Z employees reporting withdrawals.

The stats are from part one of employee financial wellness firm Payroll Integrations’ 2025 Employee Financial Wellness Report, which highlights rising concerns over retirement stability and is based on research conducted by Dynata.

The data indicates that withdrawals are not for discretionary spending but to address urgent financial needs.

Almost four in ten employees say they have withdrawn money to cover unexpected emergencies like car or home repairs. Debt repayment is the main reason for withdrawals among Gen Zs with 42% citing this, significantly higher than for Millennials (6%) or Gen X (17%).

The report suggests these financial pressures are unlikely to ease soon, with one in three (32%) workers planning to withdraw funds in the next year to cover unexpected expenses, and 18% planning to do so to manage rising day-to-day costs.

Although 87% of workers contribute to a retirement plan, more than half (59%) say they are not completely confident they will be able to retire comfortably and on time.

Key reasons for this insecurity include starting to save later than desired (36%), the rising cost of living preventing consistent saving (36%), and market volatility (30%). This lack of confidence spans all working generations.

Millennials stand out as the most confident and careful with their retirement funds, with 47% expressing complete confidence in their ability to retire comfortably and only 31% reporting having taken out money from their retirement accounts.

According to Payroll Integrations CEO Doug Sabella, these findings should serve as a wake-up call for companies.

“It’s clear that many Americans are feeling the pinch of economic circumstances, and those pressures are fundamentally reshaping their retirement planning strategies,” he says. “Many employees say they don’t feel prepared to retire on their own terms within their expected timeline, which is a strong signal to companies to increase support for employees, whether through enhanced retirement plan offerings or expanded financial education."