Trump Plan to Use 401(k) Money for Housing Down Payments to be Revealed in Davos Next Week
President Donald Trump will discuss his new plan to allow 401(k) money to be used for home purchases at the World Economic Forum in Davos next week, according to White House National Economic Council Director Kevin Hassett.
“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 Friday on “Mornings with Maria.”
“We’re going to allow people to take money out of their 401(k)s and use that for a down payment.”
White House economic advisor Kevin Hassett
Hassett added they are still talking about the mechanics of how it would work without damaging people’s retirement prospects, and that more details will be revealed when President Trump speaks at the forum—expected to happen sometime between Monday, Feb. 19 and Friday, Jan. 23.
“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.”
First-time homebuyers under age 59½ are allowed to withdraw up to $10,000 from an individual retirement account without penalty to buy a home. But currently, early withdrawals from 401(k)s and other employer-sponsored plans generally trigger a 10% penalty.
The looming proposal is sure to draw plenty of attention in both the 401(k) market and the financial industry, but one comment released Friday said it could be a step in the right direction.
“We’ll have to wait for details from the President next week. But certainly, the motivation here is to make sure that all households have exposure to a diverse set of asset classes,” said Mona Mahajan, head of investment strategy at Edward Jones. “Fundamentally, that theory and consideration is the right one. We want to make sure that all households are thinking about investments from an early stage of their career, their family development, and their home ownership development. Broadly speaking, we think if this starts a conversation about ‘how should I position my assets,’ whether it’s in equities, fixed income, or real estate, it’s a good step in the right direction.”
Without providing details, Hassett said during the interview that the average down payment for a home went from about $15,000 to $32,000. In 2020, typical down payments on homes averaged roughly 10% to 12% of the home price. By 2025, down payments had climbed to about 15% to 19% of the home price due primarily to rising home prices and higher mortgage interest rates, meaning many buyers need substantially more cash upfront today.
President Trump has soft-launched various housing proposals in recent social media posts, including this one on his Truth Social account: “I am immediately taking steps to ban large institutional investors from buying more single-family homes, and I will be calling on Congress to codify it. People live in homes, not corporations. I will discuss this topic, including further Housing and Affordability proposals, and more, at my speech in Davos “I will discuss this topic, including further Housing and Affordability proposals, and more, at my speech in Davos…”
Beyond banning institutional investors from buying single-family homes, Trump has also instructed the Federal Housing Finance Agency to purchase $200 billion of bonds issued by mortgage finance giants Fannie Mae and Freddie Mac in a bid to bring down mortgage rates.
It remains unclear how much authority President Trump has to implement many of these proposals unilaterally, despite his statements on Truth Social. Legal and policy experts have noted that some of the measures would require congressional approval, a hurdle that could prove difficult to clear.
Trump will be accompanied by five Cabinet secretaries and other top officials at the World Economic Forum, running from Monday through Jan. 23. Beyond an impressive roster of world political leaders, a total of 850 CEOs and chairs of the world’s top companies will be among the 3,000 participants from 130 countries expected in Davos this year, according to organizers.
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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.