Washington: US President Donald Trump is set to announce a proposal that would allow Americans to tap into their retirement savings to fund down payments on homes, as his administration intensifies efforts to address concerns about housing affordability.
National Economic Council Director Kevin Hassett hinted at the plan, offering a broad outline but few concrete details. Kevin Hassett suggested that homebuyers could contribute equity from their property into their 401(k) accounts, allowing retirement savings to grow alongside home ownership.
Kevin Hassett stated that, “Suppose that you put 10 percent down on a home, and then you take 10 percent of the equity of the home and put it in as an asset in your 401(k). Then your 401(k) will grow over time.” Hassett added that Trump is expected to present a ‘final plan’ during the World Economic Forum in Davos next week.
The White House has not yet clarified how the policy would work in practice, including potential tax implications. Under current rules, early withdrawals from 401(k) accounts typically trigger taxes and penalties.
The proposed change is part of a broader series of housing-related initiatives announced by the administration in response to growing public concern over the economy and rising living costs, with housing affordability ranking among voters’ top priorities ahead of midterm elections later this year.
Daryl Fairweather, chief economist at Redfin, said the proposal could help some individuals access home ownership but would not resolve the underlying affordability crisis. Daryl Fairweather remarked that, “It doesn’t really drift that far from the purpose of 401(k)s, which is to encourage people to save money for big expenses they may not have the discipline to save for.” However, she warned that widespread use of retirement funds for housing purchases could be risky if property values decline, leaving people financially exposed.
Trump has also pledged to restrict large corporate investors from purchasing single-family homes, arguing that such a move would make housing more affordable. While the idea has gained political traction, analysts remain divided on whether it would significantly affect prices.
Jason Richardson, senior research director at the National Community Reinvestment Coalition, criticised both proposals, saying they fail to address deeper structural issues. Jason Richardson added that the 401(k) proposal could disproportionately benefit higher-income Americans. Only about 55 percent of Americans hold retirement accounts, and access is significantly lower among low-income workers.
Trump has also directed housing finance giants Fannie Mae and Freddie Mac to purchase $200 billion worth of mortgage bonds, claiming the move would reduce borrowing costs. Following the announcement, average 30-year mortgage rates dipped below 6 percent for the first time in nearly three years. Despite the short-term market reaction, economists caution that the long-term impact remains uncertain.
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