As the Trump administration has recently focused on housing affordability, one of the president’s top economic advisers has revealed how Americans might be able to use 401(k) funds for a down payment on a home.
“The typical monthly payment has almost doubled for a regular family buying a regular home. And the down payment they needed to buy a home has gone from about $15,000 to about $32,000. So there’s a lot of room to make up,” said Kevin Hassett, director of the National Economic Council. Maria Bartiromo of FOX Business.
“We have a whole series of policies that are going to help people get there,” he continued. “The one that you haven’t talked about that we’re talking about as well, and the president will present the final plan in Davos next week, I’ll be flying with him, is that we’re going to allow people to take money out of their 401(k) and use it for a down payment.”
White House Economic Council Director Kevin Hassett introduced a new way for Americans to use their 401(k) to make a down payment on their home. (Getty Images/Getty Images)
Hassett was discussing Trump’s renewed proposal to direct his representatives to buy $200 billion in mortgage-backed securities, a move he said would help lower interest rates.
TRUMP’S FED CHAIRMAN KEVIN HASSETT ADVICE FOR A COMPLETE REVIEW OF THE FEDERAL RESERVE
“Biden ignored the housing market and was plunged into high crime, open borders, rampant INFLATION, the Afghan disaster and a military he left in chaos and confusion.” Trump wrote on Truth Social last Thursday. “Everything was broken, but I, as President of the United States, already fixed it!”
“Now I’m paying special attention to the real estate market. Because I chose not to sell Fannie Mae and Freddie Mac during my first term, a very good decision, and against the advice of ‘experts,’ they are now worth many times that amount – AN ABSOLUTE FORTUNE – and have $200 BILLION IN CASH,” he continued. “For this reason, I am directing my representatives to BUY $200 BILLION IN MORTGAGE BONDS. This will lower mortgage rates, DECREASE monthly payments, and make the cost of owning a home more affordable.”
When asked if he was concerned about relying on 401(k)s and harming savers later retired, Hassett downplayed those concerns.
“What you have to do is find a way, so, a simple way. We always talk about the mechanics, but let’s say you put 10 percent down on a house and then you took 10 percent of the equity in the house and put it as an asset in your 401(k), then your 401(k) would grow over time,” he explained.
“As the value of your home increases, you will be healthier, have more money for retirement,” Hassett argued, “and you will have solved the problem of liquidity constraints and will have a home earlier in life.”
Generally, Americans cannot withdraw funds from a 401(k) for a first-time home purchase without paying a penalty.
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Although there is a “first-time homebuyer exception” allowing penalty-free withdrawals from IRAs, it does not apply to 401(k) plans. According to NerdWallet, those who make a direct withdrawal before age 59½ generally must pay a 10% early withdrawal penalty plus regular income taxes.
However, Bankrate notes that a more common strategy aimed at access 401(k) funds without penalties means taking out a loan rather than withdrawing.
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