Trump reverses stance, expresses opposition to using 401(k) savings for home down payments

A White House official recently promoted a plan to allow Americans to access their 401(k) savings for a home purchase, but an official proposal failed to emerge as anticipated.

On January 16, Kevin Hassett, director of the National Economic Council, stated that the administration intended to “allow people to take money out of their 401(k)s and use that for a down payment.” He indicated that President Donald Trump planned to introduce a final version of this plan at Davos.

However, Trump ultimately reversed his position on the proposal when questioned about it at Davos, remarking that he wasn’t “a huge fan” of the idea of letting 401(k) participants use their savings for a home deposit. “I’m so happy with the way 401(k)s are doing,” he added.

Homebuying > retiring? Under current rules, 401(k) participants typically face a penalty on funds taken from their account before age 59-and-a-half—an early distribution—for various reasons, including home purchases. The regulations for Individual Retirement Accounts (IRAs) differ, permitting qualified first-time homebuyers to withdraw up to $10,000 without the 10% penalty.

Some companies permit employees to borrow against their 401(k) account balance to buy a home. According to guidelines, such a loan cannot be more than 50% of a participant’s vested balance, or $50,000.

Even before Hassett suggested this new policy, workers were already utilizing these options. By 2024, close to 25% of homebuyers had used their retirement funds—such as a 401(k), IRA, or 403(b)—to help pay for a down payment.

The specifics of how the White House proposal would differ from existing options remain unclear. However, Hassett explained to Business that the objective was to assist Americans in buying a home and then replenishing their 401(k) using equity from the property.

“We’re still discussing the mechanics, but suppose you put 10% down on a home and then you allocate 10% of the home’s equity as an asset in your 401(k); then your 401(k) would increase in value as your house appreciates,” he said.

Experts in real estate and finance expressed doubts about the plan’s feasibility. “I don’t understand how they are going to do it. There’s no way to allow people to put money back in. You can’t contribute any more than the allowable amount in any one year,” noted Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute (EBRI).

Jake Krimmel, an economist with Realtor.com, suggested that enabling potential buyers to tap into illiquid assets would probably drive home prices higher. “In the supply-constrained Northeast and Midwest, such a reform could make the affordability issue even worse,” he said.

Although Trump distanced himself from Hassett’s proposal, some legislators appear to remain supportive of the concept. Rep. John McGuire, a Republican from Virginia, introduced legislation on Jan. 21 that would permit penalty- and tax-free 401(k) withdrawals for homebuying costs, such as down payments and closing costs.

Historically high prices and a limited supply of homes have made owning a property increasingly difficult for many Americans in recent years. In response to these challenges, some employers now provide housing assistance to their staff. For instance, the food processing company USA has invested over $20 million in affordable housing for workers in locations like Cactus, Texas, and Beardstown, Illinois. Other companies help with employees’ down payments or closing costs, or contribute to mortgage buy-downs.

This report was by .