Trump Skips ‘401(k)s for Housing Down Payments’ Details in Davos Speech
President Donald Trump did not mention his rumored plan to allow the use of 401(k) funds for a down payment on purchasing a house during his widely anticipated speech today at the World Economic Forum in Davos, Switzerland.
So the wait continues for details about the plan, which were teased last week by White House National Economic Council Director Kevin Hassett after Trump had posted about it on his Truth Social account on Jan. 7.
“We’re going to allow people to take money out of their 401(k)s and use that for a down payment,” Hassett told Fox Business Network in an interview airing Jan. 16 on “Mornings with Maria.”
“Suppose that you put 10% down on a home and then you take 10% of the equity of the home and put it in as an asset in your 401(k),” Hassett said. “Then your 401(k) will grow over time as the value of your house grows… More money for retirement and you’ll have solved the liquidity constraint problem and gotten yourself a house early in life.”
Hassett said they were still talking about the mechanics of how it would work without damaging people’s retirement prospects, and that more details would be revealed when President Trump spoke in Davos. But in wide-ranging remarks that lasted over an hour, Trump never mentioned the 401(k) money for down payments plan.
While the White House may well reveal more details about the proposal in the coming days, rumors of the plan have generated some public pushback.
High-profile economist Peter Schiff argued on social media site X that it would do more harm than good.
“In his latest attempt to keep overpriced home prices from falling so that more people could afford them, Trump will soon unveil a plan to allow homebuyers to use their 401(k)s to fund down payments. That way Americans can deplete their retirement savings to overpay for houses,” Schiff posted to X on Jan. 18.
Executive Director of the Institutional Retirement Income Council (IRIC) Kevin Crain said in a recent LinkedIn post that he is “not a fan” of the plan to use 401(k) money for down payments on houses.
“There is already a way to access 401(k) assets for home purchases, the ability to take a loan from the plan for primary residence purchases. And with that, the participant repays the loan (with interest) to protect the longer-term retirement savings,” Crain posted.
“My broader concern is that the mission of the 401(k) plan continues to be blurred by being made into a multifaceted savings plan. Its original intent was to be a long-term retirement savings plan. Now the plan could offer emergency savings withdrawals, potential home residence withdrawals, and other ways to access money before retirement. That creates complexity for employees to understand the plan’s purpose and engage,” the post concluded.
First-time homebuyers can currently withdraw up to $10,000 penalty-free from IRAs, but similar early access to 401(k) funds generally triggers a 10% penalty. Changing those rules would require tax-law revisions, a potentially difficult task in a closely divided Congress. While some penalty-free early withdrawals are already allowed for specific hardships, and most 401(k) plans permit loans that must be repaid with interest, the administration’s proposal could expand access to down payment funds for buyers unable or unwilling to take on a 401(k) loan.
The typical first-time homebuyer is now 40 years old, according to the National Association of Realtors. For many households, the down payment remains the gatekeeper; Realtor.com estimates it takes the typical buyer 7 years to save enough to put money down.
SEE ALSO:
• Trump Plan to Use 401(k) Money for Housing Down Payments to be Revealed in Davos Next Week
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.