President Trump is rejecting a proposal raised by his administration that would have enabled homebuyers to use money from their 401(k) accounts to finance down payments.
The Hill reports National Economic Council Director Kevin Hassett previewed the proposal last week to highlight the administration’s efforts to address challenges in securing affordable homeownership. Hassett offered no details on how this plan could world, although he stated the president would speak about it during his speech this week at the World Economic Forum in Davos, Switzerland.
But Trump made no mention of that plan in his speech. In remarks made to reporters on Air Force One Thursday evening during his return flight to Washington, Trump stated a lack of enthusiasm for the idea.
“I’m not a huge fan of it,” he said. “Other people like it. They’re talking about taking money out to put a deposit down on a home. And one of the reasons I don’t like it is that their 401(k)s are doing so well. 401(k)s are up 80, 90% in some cases. And you know, you’re talking about a lot of people. I like keeping their 401(k)s in great shape. I like keeping their 401(k)s. And I’m not a huge fan of that, putting down a deposit.”
Photo: Gage Skidmore / Flickr Creative Commons
The typical 401(k) portfolio generates an average annual return of approximately 5% to 8% over the long term, depending on market conditions and asset allocation (e.g., stocks vs. bonds). While some exceptionally strong years have seen average returns around 18% (as in 2023), gains of 80-90% are not a standard or common occurrence for most participants. 80-90% are OUTLIERS.
It’s their 401k that they contributed their money to. Allow it to be an option buyers can choose to use or not use.
Home buyers have been taking out funds from 401K accounts for years. They end up paying themselves back.
Using the 401 K funds to provide the ability to access the purchase of a home is paramount. Allows RE Buyer to buy a long-term asset that enables the formation of a family and the accumulation of equity in a reliable asset, vs the uncertainty of the stock market. Also offers appreciation for funding retirement.
in case there is a foreclosure, people will lose that down-payment all together. Not a good idea to use it at all.
Whoever can make this proposal a reality will get credit for it and this proposal is a no brainer to help first time home buyers. If Trump won’t do it, the next President will.
It is already permissible to use $10,000 from 401K. A 401K is a long-term investment and should not be used as a savings account. I would advise against using any more than the current $10,000 withdrawal allowed for a home purchase.