Trump advisor reveals 401(k) retirement funds for home down payments

As the Trump administration has put housing affordability in the spotlight recently, one of the president’s top economic advisers revealed how Americans can use 401(k) funds to make a down payment on a home.

“The typical monthly amount for a typical family buying a typical home has almost doubled. The down payment they need to buy a home has gone from about $15,000 to about $32,000. So there’s a lot of room for compensation,” Kevin Hassett, director of the National Economic Council, told FOX Business’ Maria Bartiromo.

“We have a whole range of policies that will help people do that,” he continued. “The thing that you didn’t mention that we’re also talking about, and the president will be rolling out the final plan in Davos next week, and I’ll be traveling there with him, is that we’ll allow people to take money out of their 401(k) and use it as a down payment.”

Hassett was discussing Trump’s renewed proposal to direct his representatives to buy $200 billion in mortgage-backed securities, a move he claims will help lower interest rates.

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“Biden ignored the housing market, instead indulging in high crime rates, open borders, runaway inflation, the Afghanistan debacle, and a military that left him in disarray and disarray.” Trump wrote on Truth Social Last Thursday. “It’s all broken, but I, as President of the United States, have already fixed it!”

He continued: “Now, I pay special attention to the housing market. Because I chose not to sell Fannie Mae and Freddie Mac in my first term, a truly remarkable decision, and against ‘expert’ advice, they are now worth many times that amount – an absolute fortune – and have $200 billion in cash.” “For this reason, I have instructed my representative to purchase $200 billion worth of mortgage securities. This will lead to lower mortgage rates, lower monthly payments, and make the cost of owning a home more affordable for everyone.”

When asked if he had concerns about tapping a 401(k) and hurting savers later in retirement, Hassett downplayed those concerns.

“What you have to do is come up with a way, a simple way. We’re still talking about the mechanics of it, but let’s say you put a 10% down on the house, and then you take 10% of the equity in the house, put it as an asset in the 401(k), and then explain that the 401(k) will grow over time.”

“As the value of your home grows, you will be healthier, you will have more money for retirement, you will have solved the problem of cash constraints and got yourself a home earlier in life,” Hassett said.

Typically, Americans cannot withdraw money from their 401(k) for a first-time home purchase without paying a penalty.

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While there is a “first-time homebuyer exception” that allows penalty-free withdrawals from IRAs, it does not apply to 401(k) plans. Those who make a direct withdrawal before age 59½ typically owe a 10% early withdrawal penalty on top of ordinary income taxes, according to NerdWallet.

However, Bankrate points out that the most common strategy for accessing 401(k) funds without penalties is to take out a loan rather than a withdrawal.

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