Donald Trump to unveil home buying plan involving retirement funds
US President Donald Trump is set to announce a plan that would allow Americans to use their retirement savings to finance the purchase of a home.
National Economic Council Director Kevin Hassett, who hinted at the plan Friday, provided few details on how withdrawals from U.S. corporate retirement accounts — known as 401(k)s — would work.
“Let’s say you put 10 percent down on a house, then you take 10 percent of the equity in the house and put it as an asset in your 401(k). Then your 401(k) will grow over time,” Hassett said on Fox Business.
Trump will present a “final plan” at the World Economic Forum in Davos next week, he added.
The White House did not immediately respond to a request for comment on the upcoming proposal, including tax implications. Currently, employees who choose to withdraw money from their retirement accounts generally must pay fees and taxes.
The anticipated 401(k) plan is the latest in a series of recent housing affordability proposals as the Trump administration faces growing public pessimism over its handling of the economy.
Housing affordability remains at the top of Americans’ list of concerns. Trump has sought in recent weeks to ease voter anxiety ahead of midterm elections later this year, announcing a series of proposals aimed at addressing the high cost of housing.
Daryl Fairweather, chief economist at Redfin, said using retirement funds for down payments won’t solve the housing affordability crisis. But it could help some people meet their current financial needs and better prepare for retirement.
“It doesn’t really stray away from the goal of 401(k)s, which is to encourage people to save money for those big expenses that they may not have the discipline to save for,” Fairweather said.
She compared it to a temporary pandemic-era policy that allowed people to access funds in their retirement accounts to make down payments with fewer penalties.
Still, she said it would be concerning if people started emptying their 401(k)s to buy a home. That house could eventually lose its value, putting them in an even worse financial situation.
Last week, Trump announced he would ban large investors from purchasing single-family homes, in an effort to make housing more affordable for Americans. The pledge reinforced an idea that has been circulating for years, although some analysts question how much a ban would affect prices.
Trump also recently ordered Fannie Mae and Freddie Mac, the government-backed housing finance companies, to buy $200 billion (£149.4 billion) of mortgage bonds. The move, he said, would lower mortgage rates.
An increase in purchases could boost demand for mortgage-backed securities, which in turn could help lower mortgage rates for borrowers.
The average rate on a 30-year mortgage fell below 6% for the first time in nearly three years after his announcement — “and it’s not with the help of the Fed,” Trump said during a speech in Michigan this week, referring to the Federal Reserve. The Fed’s benchmark interest rate can indirectly affect mortgage rates.
Hassett on Friday encouraged Trump’s decision to order bond purchases. “We’ve seen a pretty big reaction to this announcement, and I think it makes us all feel better, because the truth is fewer people are buying homes right now than we’ve seen in my lifetime,” he said.
But housing economists have warned that bond purchases may not lower mortgage rates significantly in the long term.
“The key now is the timing and cadence of these purchases, which will determine whether the impact is healthy or whether it introduces volatility into the mortgage market,” said Jeff DerGurahian, chief economist at LoanDepot, a mortgage lender.
