updated 8/20/2010 7:12:52 PM ET 2010-08-20T23:12:52

In the wake of news about a spike in new applications for unemployment benefits comes another potentially troubling sign: A record number of workers made hardship withdrawals from their retirement accounts in the second quarter.

What's more, the number of workers borrowing from their accounts reached a 10-year high, according to a report issued Friday by Fidelity Investments.

The trends reflect the financial stress many workers find themselves in as the economy struggles to find sure footing, said Beth McHugh, Fidelity's vice president of marketing insight.

High unemployment and companies cutting back on overtime or overall hours have reduced the take-home pay of many workers.

"People tend to be taking home less," she said. "As a result the percentage of individuals initiating hardship distributions is one of the things we're concerned about."

Fidelity administers 17,000 plans, which represents 11 million participants. In the second quarter, some 62,000 workers initiated a hardship withdrawal. That's compared with 45,000 in the same period a year ago.

What's also eye-opening is that 45 percent of participants who took a hardship withdrawal a year ago took another one this year, McHugh said.

To be eligible for a 401(k) hardship withdrawal, individuals must demonstrate an immediate and heavy financial need, according to IRS regulations. Certain medical expenses; costs relating to the purchase of a primary home; tuition and education expenses; payments to prevent eviction or foreclosure on a primary home; burial or funeral expenses; and repair of damage to a primary home meet the IRS definition and are permitted by most 401(k) plans.

A key concern is that these withdrawals are just that, they are not loans. As a result there can be a significant impact on someone's overall retirement savings. If the worker is younger than 59½, they'll pay a 10 percent penalty for early withdrawal in addition to taxes.

The average age of the workers taking hardship withdrawals is between 35 and 55, their peak earning years. It's also often a time when competing financial challenges emerge, McHugh said.

The good news in the report was that the average 401(k) account balance as of the end of the second quarter was $61,800; up 15 percent from the same time last year, but down from the end of the first quarter of 2010.

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    >>> good evening. it's the economy in the news on this summer friday night, and a trend that scares a lot of the experts and the people who are engaging in it. a record number of people are dipping into their 401-k plans to get money. withdrawals are now at a ten-year high. increasingly, americans in money trouble in this bad economy are borrowing from their futures, taking from their own retirement. many of them say they have no choice. they know the risk of this very dangerous financial game. it's where we begin tonight with nbc's john yang in chicago. good evening.

    >> reporter: good evening, brian. these numbers come from the number one provider of workplace investments. what's really troubling is that a record number aren't just borrowing from their 401-ks. they are taking what the irs calls hardship withdrawals and the consequences of that can be devastating. vicki redeken hasn't had a full-time job in nearly three years. after burning through her savings she took the step he hoped to avoid. she raided her 401-k to pay taxes on her house.

    >> it was that day i had to make the decision that it had to come out that i cried. i could cry right now thinking about it.

    >> reporter: a painful step more americans are taking. according to fidelity, the number of people dipping into their 401-ks is on the rise. the top reasons, avoiding foreclosure or eviction, paying for college and buying a home. even more troubling, 45% of those who made hardship withdrawals last year made another one this year -- one more sign that the economy is struggling and that the effects of the great recession could be felt long after it's over. randall crosner is a former fed governor.

    >> as people are facing unemployment, not earning as much as they have hoped it's going to be more difficult for them to pay themselves back.

    >> reporter: the difficulties are compounded by tax implications. when you make a hardship withdrawal you pay income taxes and a 10% penalty on the money. even loans from 401-ks carry a cost. analysts say touching retirement savings should be a last resort after cutting spending to the bone, perhaps even selling your house. raiding a 401-k, they say, is literally mortgaging the future.

    >> people are spending future dollars that may never come again. if you take this money now today, think about what's going to happen in 20 years.

    >> reporter: but for vicky redeken who says she has to scrape to come up with grocery money, the worries are more immediate.

    >> just go that one minute at a time and you can make it through that minute. and then that's how i get through the day.

    >> reporter: the numbers show that the average account has about $62,000. that's an increase from last year, but still, experts say, not nearly enough for a secure retirement. brian?

    >> all right, john. jo john yang starting us off tonight.

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