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Saturday, Jan 17, 2026
Outside the box.
White House Proposes Letting Americans Tap Retirement Accounts for Home Down Payments
Administration readies plan to permit penalty-free use of 401(k) funds to boost housing affordability, to be unveiled at Davos
The White House has signalled a major shift in federal housing policy by advancing a proposal that would allow Americans to withdraw money from their 401(k) retirement accounts for use as a down payment on a home, National Economic Council Director Kevin Hassett said on January 16. The initiative, which President Donald Trump is expected to formally unveil at the World Economic Forum in Davos, Switzerland, aims to ease persistent challenges in the housing market by unlocking liquidity for prospective buyers whose retirement savings are otherwise inaccessible under current rules.
Under the plan outlined by Hassett in an interview, individuals would be permitted to take funds from their 401(k)s without the usual early-withdrawal penalties and potentially use a portion of their future home equity as an asset within their retirement accounts — a mechanism designed to preserve long-term retirement security while addressing upfront affordability barriers.
Presently, retirement law allows withdrawals from 401(k) plans only under strict conditions and typically imposes a ten per cent penalty for early distributions before age fifty-nine and a half, unlike individual retirement accounts where a limited penalty-free withdrawal for first-time homebuyers is permitted.
Hassett emphasised that officials were still refining the technical details of the proposal and that the administration sought a simple, practical framework that would not unduly undermine savers’ future retirement prospects.
The housing affordability strategy forms part of a broader agenda by the administration to address cost-of-living pressures, including proposals to restrict institutional investor purchases of single-family homes and measures to lower mortgage rates through secondary market support.
Supporters of the initiative argue that empowering Americans to use their own savings for down payments could expand homeownership opportunities, particularly for younger and first-time buyers, while critics warn that tapping retirement funds could diminish long-term nest eggs without guaranteed gains.
The forthcoming announcement at Davos is expected to provide further specifics on eligibility, safeguards and legislative pathways for the proposal, which would require congressional approval to alter retirement account tax and distribution rules.
Under the plan outlined by Hassett in an interview, individuals would be permitted to take funds from their 401(k)s without the usual early-withdrawal penalties and potentially use a portion of their future home equity as an asset within their retirement accounts — a mechanism designed to preserve long-term retirement security while addressing upfront affordability barriers.
Presently, retirement law allows withdrawals from 401(k) plans only under strict conditions and typically imposes a ten per cent penalty for early distributions before age fifty-nine and a half, unlike individual retirement accounts where a limited penalty-free withdrawal for first-time homebuyers is permitted.
Hassett emphasised that officials were still refining the technical details of the proposal and that the administration sought a simple, practical framework that would not unduly undermine savers’ future retirement prospects.
The housing affordability strategy forms part of a broader agenda by the administration to address cost-of-living pressures, including proposals to restrict institutional investor purchases of single-family homes and measures to lower mortgage rates through secondary market support.
Supporters of the initiative argue that empowering Americans to use their own savings for down payments could expand homeownership opportunities, particularly for younger and first-time buyers, while critics warn that tapping retirement funds could diminish long-term nest eggs without guaranteed gains.
The forthcoming announcement at Davos is expected to provide further specifics on eligibility, safeguards and legislative pathways for the proposal, which would require congressional approval to alter retirement account tax and distribution rules.
