A record number of people are making withdrawals from their KiwiSaver funds due to financial difficulties.

Of the 6400 withdrawals made throughout December, more than half of them were for hardship.

Withdrawals for anything other than retirement or a first home are only available in certain cases like after a medical emergency or sudden expense.

But the number of early withdrawals has jumped significantly in the past year from 17,900 in 2022 to 29,530 in 2023.

Kiwibank chief economist Jarrod Kerr says it was concerning but unsurprising given the circumstances.

"It reflects what we're hearing from customers, we're seeing the rapid rise in interest rates affecting households and we're also seeing the cost of living crisis continue to bite," he says.

"[It is] forcing households to reconsider their budgets."

The number of financial hardship withdrawals was trending upwards month-on-month.

The 3450 financial hardship withdrawals in December broke November's record of 3270, which broke October's record of 2800.

Retirement commissioner Jane Wrightson told Midday Report the trend was worrying.

"I think it's a really disturbing set of data... It's the first time, I think, that the hardship withdrawals have exceeded the home ownership withdrawals," she says.

"The home ownership withdrawals are a good thing, the hardship withdrawals are a bad thing."

Māngere Budgeting Services Trust chief executive Lara Dolan says more and more clients were asking for help withdrawing from their KiwiSavers.

"People's incomes are quite low and they're unable to save for rainy day events," Lara says.

"Medical events, a death in the family, they have to travel overseas for a funeral and they're just unable to borrow anymore so they use their KiwiSaver."

Auckland Central Budgeting senior financial mentor Teresa White says the extreme storms earlier in the year caught people off guard too.

"Particularly people whose cars have been flooded, people who didn't have insurance for their vehicle, or people who didn't have contents insurance so they had to replace household items," Teresa says.

"A lot of the grants that were available to them weren't enough to cover all the expenses."

But by withdrawing from their KiwiSavers early, Lara worried her clients were sacrificing their futures for the present.

A financial hardship withdrawal should only be taken as an absolute last resort, she says.

"It's absolutely a huge concern, our financial mentors work with families to find other solutions.

"We can look at consolidating their debt, creating a household budget to fix that gap... [using KiwiSaver] is a last resort."

Teresa agreed.

"You might get a bit of money and it might help you out for a short period, but after a while you're back at the same place again," she says.

"In my mind that's a waste of your future savings."

But Kiwibank's Jarrod Kerr says people should have the option to dip into their KiwiSavers when times were tough.

"In periods of high stress like this, I think it's helpful for people to be able to dip into it," he says.

"So long as when they get back to full health they start saving again."

The high number of KiwiSaver withdrawals was a sign the Reserve Bank should lower interest rates, Jarrod says.

"They've raised interest rates too high and it's having a severe impact on too many households."

- Felix Walton/ RNZ