Hardship Withdrawals Among Households with Disabilities

Christi Wann, John Trussel () and Lisa A. Burke-Smalley ()
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John Trussel: Gary W. Rollins College of Business, The University of Tennessee at Chattanooga
Lisa A. Burke-Smalley: Gary W. Rollins College of Business, The University of Tennessee at Chattanooga

Journal of Family and Economic Issues, 2025, vol. 46, issue 3, No 18, 919-934

Abstract: Abstract Given recent economic and personal challenges, inflation, and periods of unemployment, households with disabilities can become particularly financially challenged, perhaps even to the point of executing hardship withdrawals from their retirement savings. This is an important issue for Americans – particularly for families with disabilities - because typically early withdrawals from retirement accounts are subject to a 10% penalty tax (or 25% penalty tax on Simple IRAs) in addition to being taxed at the individual’s marginal tax rate. In the present study, we use the 2021 National Financial Capability Survey data and find that households with disabilities indeed have a 6.37% higher probability of taking hardship withdrawals than households without disabilities. More specifically, households with seeing, ambulatory, or multiple disabilities have a 7.04%, 7.57%, or 10.93% higher probability of taking hardship withdrawals when compared to households without disabilities, respectively. Given the understudied nature of this niche, we develop, test, and provide a downloadable prediction model that can be used by households with disabilities, financial planners, and other policymakers to identify those who are likely to take a hardship withdrawal, as well as offer practical implications.

Keywords: Hardship withdrawals; Households with disabilities; Retirement planning for vulnerable populations; Personal financial planning; Financial fragility (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10834-024-09987-3

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