Trump Wants Homebuyers to Tap 401(k)s for Down Payments. Should They?
https://www.bloomberg.com/news/articles/2026-01-16/trump-wants-homebuyers-to-tap-401-k-s-for-down-payments-should-they?srnd=homepage-americas&embedded-checkout=true
Posted by 3xshortURmom
30 Comments
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Will allowing people to withdraw these amounts from 401Ks help improve Americans’ lives through better access to homeownership or will it cripple them financially and leave them unprepared for retirement?
I think this could be good. My earliest contributions to a 401k were all Roth contributions because you are able to withdraw the principle at any time without penalty, and being young in life I wasn’t sure if I would need it or not. I did end up needing some for an emergency and it was nice to have. Being able to invest while also being able to use it for a down payment would be a major QOL bump for those just starting out.
We need an Australia like system where you can’t take it out, but it moves around with you.
People who use their 401k’s for savings never take it out just once. They look at it differently and think they’ll never get old.
It should be set it and forget it.
401k’s with even a 3 percent match are far better than pensions. But only if people use them and don’t take the money out for every “emergency”.
It’s a terrible idea. Retirement in this country is woefully underfunded. Weakening the 401k will only make that worse. Slapping a bandaid on the housing problem doesn’t help.
terrible idea. your early years are where you get the most out of compounding, we should be encouraging people to put more money in then rather than take it out just to make economic numbers look better.
At a certain point retirement accounts stop being a retirement fund and more like a tax free investment vehicle as long as you spend the money in government approved ways. And by saving money for yourself for retirement or housing, you aren’t creating any more houses, you aren’t creating any more real resources to sustain retirees, you’re just making your piece of the pie bigger relative to other’s. More people passively piling money blindly into funds doesn’t increase net investment, just competition over the same amount of opportunities, and at a certain point reduces the quality of investment. If we want to make housing more affordable, we have to look at ways to actually increase the supply of housing. Financial tricks and subsidies of the last many decades haven’t worked. I doubt this will either.
I would love to be able to tap my 401k to expand on my house personally but the whole point of a 401k is to sacrifice now to be comfortable in retirement.
“Hey guys. How else can we erode the middle class so it’s only us rich and the very poors?”
“I know boss. Let’s convince them to burn their 401ks so they don’t have retirement.”
There is no way out of the scalding inflation that was created due to Covid, other than to allow time or a significant correction to restore affordability.
Repeat: there is no way out other than correction down or allowing time to pass.
As long as theres limits and restrictions, I dont hate this.
While I have been built a nice little house down-payment, the housing prices have gotten astronomical to the point that I still feel 5-10 years away from being able to realistically be able to buy my first home and thats assuming the housing market doesnt outpace my savings. Its gotten to the point where it feels like I have choose between saving for retirement or buying a home. I dont support being able to dump an entire 401k for a down payment, but I feel being able to use it as a way to help with a down-payment isnt a bad idea. And im aware robbing your retirement isnt good, but considering how a house is also an investment that grows with you, I feel like this is one of the few situations where you really arent “robbing” your retirement.
Why is this an economic question? Regardless if this is a personal good idea (it’s terrible) there is no reason to listen to this man or admin on personal financial decisions. Especially when they are desperate to try anything to fuel the economy in any way possible.
Such a horrible idea. I’ve taken loans against my 401K before and I’m pretty sure that money was set aside and not invested during the loan period. Maybe this has changed but the opportunity loss here is significant if not. I’m forming the opinion that due to declining birth rates this is a mechanism to keep people employed longer. Just another way to keep the wage slaves indentured.
Lol. This was one of the conservative policies in australia, they took it to the last election.
It was the largest left wing landslide ever.
Absolutely not. Only a financially inept person who could bankrupt casinos (yes, casinos) would suggest such a thing. Oh, wait—Trump did. Someone who was handed his millions in life & never worried a second about putting together a financial plan.
You’d crush the early ability to get to the first 100K and destroy future compounding. Take the tax break & fund your 401k or other tax-deferred option best you can. Take the tax breaks from homeownership as well. Remember: PAY YOURSELF FIRST.
Probably not considering most Americans are vastly behind where they should be in terms of retirement.
Most financial institutions recommend you have 1x of your salary in retirement savings by the time you’re 30.
Most Americans don’t even start thinking about it until their mid thirties.
I think it would be a different story if someone was like diligently saving into their 401k, got a bit ahead of schedule and then after like a decade of compounding they decide to settle down somewhere.
But that isn’t reality. Most people are in catch up mode.
I took 10k from my 401k back in 2008 for a down payment on a house. I was in my later 20s and had time to make it up. Since I was paying rent during that time, it seemed the best option bc I otherwise had a really hard time socking money away for a down payment. Most people are struggling to even contribute to their 401ks so no, I don’t think this will help much.
I don’t hate his idea of passing a law to outlaw corporations from buying single family homes. I’d rather we see that happen and possibly ways to encourage seniors or empty nesters to downsize. I know tons of seniors that are living in 3br homes. I’m not saying kick them out or force them out by any means – but some way to open up those homes for younger people to get into.
This idea is as stupid as 50 year mortgages.
Borrowing from your 401K is already allowed for home buying down payments – so this is nothing new. Yes, it is a loan, but it is to yourself and your account interest actually goes back to the account, so you are paying yourself back over time for what you borrow.
I once took a loan from my 401k. It wasn’t directly for a downpayment for a house, but it was related to a home purchase. Cut to 6 months later, my company laid me off, the 401k loan was due within a month iirc and we had very little liquid cash because of the home purchase and other obligations. I ended up having to take an additional withdrawal from the 401k to pay off the outstanding balance on the loan. Between the taxes and penalties I ended up draining the 401k balance by close to double the value of the loan in order to pay it back. Would never recommend these loans to anyone unless it was an absolute emergency (literally, such as a life saving medical procedure and no other way to pay for it).
I bought my first house in 2011. I got approved for a 10% down loan, and last minute the lender chickened out and demanded 20%. I tapped 10k each from my wife and my IRAs (no penalty). Great financial decision. We still own that house, it’s over 2x in value, it’s a rental now with strong cash flow.
We could do this without paying tax on it, effectively 6k more than if we just saved it.
Trump wants working people to stay poor and indebted and desperate so his benefactors maintain a steady supply of cheap labor. Every single policy and proposal must be viewed through this lens.
I dont think its too unreasonable a premise, home equity is effectively retirement savings.
Id probably just out in a tax deduction for homeowners putting in a down payment.
The problem is not whether you should be able to use your retirement accounts to fund a home purchase. The problem is that homes are far too expensive. The ability to own a home and to retire from the workforce should not be in competition with one another. We have a huge housing shortage and there is little incentive to build less costly homes.
I think creating an additional tax advantaged investment vehicle specifically for primary housing would make more sense. It doesn’t help out current younger individuals right away, but the best time to start is now.
Like most of his ideas, no, it’s a terrible idea. Now you have a house, with a 50 year mortgage, that you will lose when you can’t work anymore. Its all part of the housing subscription model.
Saying youre going abolish ssi while turning around and saying people should draw down their retirement savings for a house is quite the message. Lets see who falls for it.
Of course he wants some sort of boost in short term effects (more buyers in the housing market) to inflate some statistics. He doesn’t care about long term effects at all. Hence things like his tax bill (and the one in his first term) that house the economy to make him look good but cripple the future with debt and inequality.
What kind of person would take financial advice from the worst Trust Fund Baby clown businessman on the planet? His daddy replaced his entire fortune 3 times, he can’t even read, and he was never mentally or physically capable of getting a Driver’s License.
I wouldn’t do that. I don’t think anyone *should*.
That said, people should be able to make their own financial decisions. That’s not the government’s job.
In competitive markets, winning buyers will usually have to bid close to the max they can afford. So if you’re trying to make housing more affordable by giving people access to more cash, you are just really letting them add the max they let you take out of the 401k to what they would normally be able to afford, driving up winning bids and causing prices to adjust upwards. It’s not that different from how low interest rates post-2008 let people afford much larger loans and housing prices doubled or more since then in competitive markets. Sellers will capture the windfall here too.
If you want to make it affordable, you need to make it less competitive. The absolute best way would be to build a whole lot more homes, but that seems very complicated here in America, especially in the places people want to live like big cities. Would be good to focus on making it less complicated.
Id be willing to do that if they allowed an untaxed forgiven hardship withdrawal. Then maybe…. Even if its not the best idea to pull from your retirement.