Trump Backs Away From 401(k) Home Down Payment Plan Amid Advisor Concerns
President Donald Trump last week expressed reservations about a proposal, initially supported by one of his economic advisors, to allow Americans to tap their 401(k) savings for home down payments – an idea that has drawn criticism from many financial advisors.
“I’m not a huge fan. Other people like it,” Trump told reporters on Thursday aboard Air Force One en route to Washington, D.C., following his attendance at the World Economic Forum’s annual meeting in Davos, Switzerland.
Kevin Hassett, director of the National Economic Council, had indicated on January 16th that the president would unveil such an initiative while in Davos.1
Trump added, “One of the reasons I don’t like it is that their 401(k)s are doing so well.”
401(k) Balances Reach All-Time Highs
The average 401(k) balance jumped 9% in the third quarter to $144,400, according to Fidelity Investments, marking an all-time high.1 Approximately 72% of the 126.9 million private-sector workers have access to a retirement plan at perform, with 53% participating in a plan, according to the Bureau of Labor Statistics.
Financial Advisors Express Caution
While options exist for accessing 401(k) or IRA funds for down payments, financial experts generally advise against it. Certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York and a member of CNBC’s Financial Advisor Council, stated, “I really view tapping retirement money more as an option of last resort.”1 He added, “By and large, if [someone] is using retirement money to reach other goals, I would raise questions about priorities and affordability overall.”
Addressing Housing Affordability
Affordability remains a significant challenge for potential homebuyers, with costs for everyday purchases increasing by over 25% since January 2020, according to the consumer price index.1
Despite backing away from the 401(k) proposal, the White House issued an executive order on Tuesday calling for a ban on large institutional investors buying single-family homes. These purchases represent just 2% of the overall market, but a sizable share in some areas, according to a 2024 report from the Government Accountability Office.1 Trump also indicated plans to direct Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed bonds to lower home loan interest rates.
Market Conditions and First-Time Homebuyers
The national median sale price for a single-family home was $409,500 in December, up slightly from a year earlier but down from a peak of $435,300 in June, according to the National Association of Realtors. The average interest rate on a 30-year mortgage is 6.17% as of Monday, according to Mortgage News Daily.1
The share of home purchases involving first-time buyers recently hit a record low of 21%, according to the National Association of Realtors’ 2025 Profile of Home Buyers and Sellers. The average age of first-time homebuyers is now 40, an all-time high, up from 33 in 2020.1
Down Payment Challenges and 401(k) Balances
The median down payment among all buyers last year was 19%, according to the National Association of Realtors, with 10% for first-time buyers and 23% for repeat buyers. On a $409,500 home, a 20% down payment would be $81,900, while a 10% down payment would be $40,950.1
While the average 401(k) balance is $148,153, according to Vanguard’s 2025 How America Saves report, balances are concentrated among older savers. The median 401(k) balance for those aged 25-34 is $16,255, with an average of $42,640. For those aged 35-44, the median is $39,958, and the average is $103,552.1
Existing Options for Accessing Retirement Funds
Currently, qualified first-time homebuyers can withdraw up to $10,000 from an IRA without penalty. 80% of 401(k) plans allow loans, with a maximum borrowing limit of 50% of the vested account balance or $50,000, whichever is less.1 Hardship withdrawals are permitted in 94% of plans, but are subject to taxes and penalties.1
Boneparth cautioned, “You’d be disrupting retirement dollars for a different goal.”1
Keep reading