Americans are stashing away more money than ever for retirement, but they remain a ways away from the "magic number" needed to retire comfortably.

The average balance in employer-sponsored retirement contribution plans rose to $134,128 in 2023, a 19% increase from the previous year, according to new data published by Vanguard Group, which tracks about 5 million retirement accounts. The median account balance was $35,286, a 29% increase from 2022.

The sizable increase in account balances stems from an increase in equity and bond markets, as well as ongoing contributions over the year, Vanguard said.

Despite the jump, account balances are still nowhere near the $1.46 million figure that Americans believe they need in order to retire comfortably, according to a recent study published by Northwestern Mutual.

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The figure represents a nearly 15% jump from the $1.27 million that Americans said they needed in 2023, easily outstripping the current 3.3% inflation rate in the country. Over the past five years, Americans' "magic number" has surged 53% from the $951,000 reported in 2020, according to the financial services firm.

The Vanguard report also pointed to other signs of financial distress among households. A growing number of Americans tapped their retirement accounts to cover a financial emergency as high inflation raged.

About 3.6% of workers participating in employer-sponsored 401(k) plans made a so-called "hardship" withdrawal in 2022, according to the report. That marks a major increase from the 2.8% rate recorded the prior year and the pre-pandemic average of about 2%. It is the highest level of hardship withdrawals since Vanguard began tracking the data in 2004. 

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Hardship withdrawals allow workers to tap their 401(k) for an "immediate and heavy financial need."

Individuals who make these types of withdrawals owe income tax on the money and could be hit with a 10% early withdrawal fee if they are under the age of 59½. However, the penalty can be waived if workers provide adequate evidence that the money is being used for a qualified hardship, such as a medical expense. 

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A person who takes a hardship withdrawal also cannot pay it back to their 401(k) and cannot roll that money into another retirement savings account. 

About 40% of individuals who dipped into their 401(k) last year did so to avoid foreclosure – up from about 36% in 2022, according to the report. 

The increase in workers tapping their 401(k)s for emergency purposes comes as they continue to confront high inflation that has rapidly eroded their purchasing power. High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.