Must you use a 401(ok) to purchase a house? Trump’s ‘not an enormous fan’

President Donald Trump final week took exception to a proposal backed by considered one of his financial advisors to let Individuals faucet their 401(ok) financial savings for house downpayments — an concept that many monetary advisors additionally oppose.

“I am not an enormous fan. Different individuals prefer it,” Trump informed reporters on Thursday aboard Air Power One en path to Washington from Davos, Switzerland, the place he had attended the World Financial Discussion board’s annual assembly. Kevin Hassett, director of the Nationwide Financial Council, informed Fox Enterprise on Jan. 16 that the president would unveil such an initiative whereas in Davos.

Trump added, “One of many causes I do not like it’s that their 401(ok)s are doing so effectively.”

The common 401(ok) steadiness jumped 9% within the third quarter to $144,400 from the identical time a yr earlier, in response to Constancy Investments. The quantity marks an all-time excessive.

Amongst 126.9 million private-sector staff, 72% have entry to a retirement plan at work, in response to the Bureau of Labor Statistics. General, 53% of all staff take part in a plan.

There are already methods for individuals to faucet their 401(ok) or particular person retirement account to entry cash for a down fee — in some circumstances with out paying an early withdrawal penalty — however specialists say utilizing retirement funds for a house buy could not assist staff with both purpose.

“I actually view tapping retirement cash extra as an choice of final resort,” mentioned licensed monetary planner Douglas Boneparth, president of Bone Fide Wealth in New York and a member of CNBC’s Monetary Advisor Council.

“By and enormous, if [someone] is utilizing retirement cash to achieve different objectives, I might increase questions on priorities and affordability general,” Boneparth mentioned.

Affordability points have taken heart stage as households proceed to wrestle to soak up larger costs. Prices for on a regular basis purchases have jumped greater than 25% since January 2020, in response to the shopper worth index.

Whereas the president seems to be backing off the thought of utilizing retirement cash to assist house consumers provide you with down funds, the White Home did challenge an government order Tuesday that requires a ban on giant institutional buyers shopping for single-family houses.

Such purchases contain simply 2% of the general market, in response to a 2024 report from the Authorities Accountability Workplace, however in some markets these buyers personal a large share. Trump additionally mentioned earlier in January that he was directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed bonds to convey rates of interest on house loans down.

The nationwide median sale worth for a single-family house was $409,500 in December, up simply 0.4% from a yr earlier and down from the file excessive of $435,300 in June, in response to the Nationwide Affiliation of Realtors. The typical rate of interest on a 30-year mortgage is 6.17% as of Monday, in response to Mortgage Information Day by day.

An upshot is that the share of house purchases involving first-time consumers just lately hit a file low of 21%, in response to the Nationwide Affiliation of Realtors’ 2025 Profile of Residence Consumers and Sellers, which analyzed transactions accomplished between July 2024 and June 2025.

NAR information exhibits the common first-time house purchaser is now age 40 — an all-time excessive, and up from age 33 in 2020.

Given excessive house costs, amassing a down fee is among the many largest hurdles for potential house consumers. However even when staff might extra simply faucet their retirement accounts for a down fee, they could not have a big sufficient steadiness to take action.

The perfect is to place down no less than 20% to keep away from paying non-public mortgage insurance coverage, which is usually required for mortgages that exceed 80% of the house’s worth.

The median down fee amongst all consumers final yr was 19%, in response to the Nationwide Affiliation of Realtors. The quantity varies — 10% for first-time consumers and 23% for repeat consumers. This marks the best median down fee for first-time consumers since 1989 and the best for repeat consumers since 2003.

For illustration: On a $409,500 house, a 20% down fee can be $81,900. At 10%, it might be $40,950.

In the meantime, though the common 401(ok) steadiness is $148,153, in response to Vanguard’s 2025 How America Saves report, the best balances are concentrated amongst older savers. Youthful staff — those that are sometimes first-time house consumers — are inclined to have decrease 401(ok) balances.

Within the 25-to-34 age group, the median 401(ok) steadiness is $16,255 — which means half are larger, and half are decrease. The typical steadiness is $42,640, in response to Vanguard’s 2025 How America Saves report.

For 401(ok) savers ages 35 to 44, the median steadiness is $39,958, and the common is $103,552.

Private financial savings is the most typical supply for down fee funds amongst first-time consumers: Most, 59%, depend on their financial savings, whereas 26% use property similar to 401(ok)s, IRAs or shares, and 22% obtain assist from household or pals, in response to the NAR.

In that state of affairs, you pay your self again over time with curiosity. Relying on what your employer’s plan permits, you may take out as a lot as 50% of your vested account steadiness or $50,000, whichever is much less. The exception to that’s in case your vested steadiness is below $10,000, through which case you’ll be able to borrow as much as that quantity.

Loans sometimes should be repaid inside 5 years, though your employer could enable an extended compensation time period when the proceeds are used to buy a house that is your major residence.

“You possibly can take the mortgage and never should pay taxes on it [as you would with a standard withdrawal], however it’s a must to pay on that mortgage through a payroll deduction,” mentioned CFP Margarita Cheng, chief government officer of Blue Ocean International Wealth in Gaithersburg, Maryland.

Moreover, in case you go away your employer, the mortgage could grow to be due nearly instantly and thought of a taxable distribution if you’re unable to repay it, mentioned Cheng, who can be a member of CNBC’s Monetary Advisor Council.

Individually, in case your 401(ok) plan permits so-called hardship withdrawals — 94% of plans enable them, in response to Vanguard — you might be able to take cash out of your account to make use of for the acquisition of your property, however you’ll owe taxes and sometimes an early withdrawal penalty.

In 2024, 35% of hardship distributions had been used to keep away from a house foreclosures or eviction, which stays the most typical purpose for the sort of withdrawal, in response to Vanguard. One other 16% had been used to fund a house buy or restore.

Moreover, you probably have a Roth IRA — whose contributions usually are not tax-deductible however the positive factors and withdrawals are tax-free in retirement — you’ll be able to typically withdraw your contributions at any time with out tax or penalty. For earnings, nonetheless, there may very well be a tax and/or penalty.

Whereas some individuals do use their retirement financial savings to buy a home, it is necessary to keep in mind that the purpose of homeownership ought to be considered within the context of a bigger plan, specialists say. If you withdraw out of your retirement account, you not solely scale back the steadiness but in addition miss out on the positive factors that the cash would have made because of compounding curiosity.

“You would be disrupting retirement {dollars} for a special purpose,” Boneparth mentioned.