Overview
- After his adviser floated the idea, President Trump said he is "not a huge fan" of using 401(k) savings for home down payments, signaling no near-term rollout.
- Key parameters remain undefined, and any change to early-withdrawal rules would require congressional action.
- Current law imposes income taxes plus a 10% penalty on most early 401(k) withdrawals, while the floated concept would remove only the penalty, not the taxes.
- Financial experts warn withdrawals could erode long-term compounding and potentially push buyers into higher tax brackets or affect benefit eligibility.
- Existing options include 401(k) loans capped at 50% of the balance or $50,000, Roth IRA first-time buyer provisions, and HECM for Purchase for borrowers 62 and older, as the White House pursues separate housing steps such as an executive order targeting institutional single-family home purchases and a directive for GSEs to buy up to $200 billion in MBS.