The Trump administration is preparing to unveil a controversial housing initiative that would permit Americans to utilize retirement savings for home purchases. National Economic Council Director Kevin Hassett previewed the proposal during a Fox Business appearance, suggesting homeowners could potentially redirect a portion of their home equity back into retirement accounts after purchase.
‘Imagine allocating 10% for a down payment, then transferring 10% of the home’s equity into your 401(k). This approach would allow retirement savings to continue growing over time,’ Hassett explained, though he provided limited operational details regarding tax implications or withdrawal mechanisms.
The announcement, scheduled for next week’s World Economic Forum in Davos, represents the administration’s latest effort to address mounting public concern about housing affordability. Current regulations typically impose penalties and taxes on early 401(k) withdrawals, creating significant financial barriers for prospective homeowners.
This proposal follows two other major housing initiatives: a proposed ban on corporate investors purchasing single-family homes and a directive for government-backed mortgage firms Fannie Mae and Freddie Mac to acquire $200 billion in mortgage bonds. The bond purchase initiative has already contributed to 30-year mortgage rates dipping below 6% for the first time in nearly three years, according to Trump’s recent remarks in Michigan.
Economic experts express mixed views on the retirement fund proposal. Redfin Chief Economist Daryl Fairweather noted that while the plan wouldn’t fundamentally solve the housing affordability crisis, it might provide temporary financial flexibility for some buyers. She compared the concept to pandemic-era policies that allowed penalty-free retirement fund access for down payments.
However, housing economists caution that both the bond purchase program and retirement fund access could introduce long-term risks. LoanDepot’s head economist Jeff DerGurahian emphasized that ‘the timing and cadence of these purchases will determine whether the impact is healthy or introduces volatility into the mortgage market.’ Critics also warn that draining retirement accounts for home purchases could leave Americans financially vulnerable if property values decline.