Trump Administration Proposes Using 401(k) Funds for Home Down Payments
Washington D.C., Friday, 16 January 2026.
White House Economic Adviser Kevin Hassett announced today, January 16, 2026, that President Trump will unveil a finalized plan at Davos next week allowing Americans to leverage 401(k) retirement assets for residential down payments. This significant policy shift, which effectively shelves the previously discussed 50-year mortgage proposal, aims to immediately inject liquidity into the housing market by fundamentally redefining how tax-advantaged savings can be utilized prior to retirement.
Shifting Policy Priorities
The administration’s pivot to retirement assets marks a strategic departure from its previous housing initiatives. According to Federal Housing Finance Agency (FHFA) Director Bill Pulte, the White House has officially shelved its proposal for 50-year mortgages, with Pulte stating on Friday that the administration now has “other priorities” regarding housing affordability [5]. Instead, the focus has shifted entirely to unlocking capital within tax-advantaged accounts. National Economic Council Director Kevin Hassett highlighted the necessity of this move by citing the escalating barriers to entry for ordinary families; he noted that the typical down payment required to purchase a home has more than doubled, rising from approximately $15,000 to $32,000 [3]. This represents a surge of 113.333 percent, creating a liquidity trap that the administration believes warrants a revision of 401(k) withdrawal rules.
Proposed Mechanics of the Asset Swap
Under current federal regulations, withdrawing funds from a 401(k) before age 59½ typically incurs a 10% early withdrawal penalty in addition to standard income taxes, a punitive structure designed to encourage long-term saving [3]. The Trump administration’s emerging proposal seeks to bypass these penalties through a novel equity-transfer mechanism. Hassett outlined a conceptual framework where a buyer could utilize retirement funds for a 10% down payment and subsequently designate 10% of the home’s equity as an asset held within the 401(k) [2]. This structure aims to treat the residential property as a portfolio investment, allowing the retirement account to theoretically appreciate in value alongside the real estate market [2]. While Hassett emphasized that the specific mechanics are still being determined to prevent harm to long-term retirement security, the plan would effectively extend privileges similar to the “first-time homebuyer exception”—currently exclusive to IRAs—to 401(k) plans [1][3].
Broader Market Interventions
This regulatory adjustment is being deployed alongside aggressive monetary interventions intended to lower borrowing costs. President Trump recently instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities, a move Hassett promoted as a necessary reaction to a stalled market [1][2]. The impact of this directive was immediate; following the announcement and the subsequent bond purchases, the average interest rate on a 30-year mortgage fell below 6% for the first time in nearly three years [2][5]. By simultaneously injecting liquidity via retirement accounts and suppressing interest rates through government-sponsored enterprise (GSE) purchasing power, the administration is attempting to stimulate both the demand and financing sides of the housing equation ahead of the November midterm elections [1].
Upcoming Unveiling at Davos
The full scope of these economic policies is scheduled to be released next week at the World Economic Forum in Davos, Switzerland, where President Trump will present the finalized plan [1][4]. Beyond the 401(k) provisions, the administration is reportedly drafting an executive order that may include a prohibition on large institutional investors purchasing single-family homes, a measure Trump has previously promoted on social media [5]. As investors and economists await the specific details regarding the “cadence” of bond purchases and the regulatory language for retirement withdrawals, the administration frames these steps as essential to solving a liquidity constraint problem that has sidelined a generation of buyers [2][3].