New Trump Housing Plan: 401k Down Payments
New Trump housing plan: 401k down payments
The Trump administration will allow investors to tap some of their retirement savings for a home down payment, White House economic adviser Kevin Hassett said Friday, with additional details to be released next week. CPA & Financial Analyst Dan Geltrude has the breakdown.
Housing Affordability in the Spotlight
As the Trump administration has put housing affordability in the spotlight recently, one of the president’s top economic advisors unveiled how Americans might be able to use 401(k) funds for a home down payment.
“The typical monthly payment about doubled for an ordinary family buying an ordinary home. And the down payment they needed to buy a home went from about $15,000, to about $32,000. And so there’s a real lot of room to make up,” National Economic Council Director Kevin Hassett told FOX Business’ Maria Bartiromo.
“We’ve got a whole bunch of policies that are going to help people do that,” he continued. “The one you didn’t mention that we’re also talking about, and the president will put the final plan out in Davos next week, I’ll be flying up there with him, is that we’re going to allow people to take money out of their 401(k)s and use that for a down payment.”
Tapping 401(k)s for Home Down Payments
White House Economic Council Director Kevin Hassett teased a new way Americans may tap their 401(k)s for home down payments. (Getty Images / Getty Images)
Hassett was discussing Trump’s renewed proposal to direct his representatives to buy $200 billion in mortgage-backed securities, a move he claims would help drive down interest rates.
TRUMP FED CHAIR FRONTRUNNER KEVIN HASSETT HINTS AT COMPREHENSIVE FEDERAL RESERVE OVERHAUL
Trump’s Plan to Boost Housing Market
“Biden ignored the Housing Market, and instead was immersed with High Crime, Open Borders, runaway INFLATION, the Afghanistan Disaster, and a Military that he left in Chaos and Confusion,” Trump wrote on Truth Social last Thursday. “Everything was broken, but I, as President of the United States, have already fixed it!”
“Now, I am giving special attention to the Housing Market. Because I chose not to sell Fannie Mae and Freddie Mac in my First Term, a truly great decision, and against the advice of the ‘experts,’ it is now worth many times that amount — AN ABSOLUTE FORTUNE — and has $200 BILLION DOLLARS IN CASH,” he continued. “Because of this, I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS. This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”
Concerns About Tapping 401(k)s
When asked whether he had concerns about tapping 401(k)s and hurting savers later in retirement, Hassett downplayed those concerns.
“What you have to do is come up with a way, so, a simple way. We’re still talking about the mechanics of it, but suppose that you put 10% down on a home, and then you take 10% of the equity of the home, and put it in as an asset in your 401(k), then your 401(k) will grow over time,” he explained.
“As the value of your house grows, you’ll be healthy, have more money for retirement,” Hassett argued, “and you’ll have solved the liquidity constraint problem and got yourself a house early in life.”
Current Rules for 401(k) Withdrawals
Typically, Americans cannot withdraw funds from a 401(k) for a first-time home purchase without paying a penalty.
While there is a “first-time homebuyer exception” allowing penalty-free withdrawals from IRAs, it does not apply to 401(k) plans. Those who take a direct withdrawal before age 59½ typically owe a 10% early withdrawal penalty plus ordinary income taxes, according to NerdWallet.
However, Bankrate notes that a more common strategy to access 401(k) funds without penalties is taking a loan rather than a withdrawal.
Conclusion
The Trump administration’s new plan to allow investors to tap their 401(k)s for home down payments is a significant development in the housing market. While there are concerns about the potential impact on retirement savings, the plan aims to make homeownership more affordable for Americans. As the details of the plan are released, it will be important to consider the potential benefits and drawbacks.
Frequently Asked Questions
Q: What is the Trump administration’s new plan for 401(k) down payments?
A: The Trump administration will allow investors to tap some of their retirement savings for a home down payment, with additional details to be released next week.
Q: How will the plan work?
A: The plan will allow people to take money out of their 401(k)s and use it for a down payment on a home. The specifics of the plan are still being discussed, but it is expected to include a mechanism for putting a portion of the home’s equity into the 401(k) as an asset.
Q: What are the current rules for 401(k) withdrawals?
A: Typically, Americans cannot withdraw funds from a 401(k) for a first-time home purchase without paying a penalty. There is a “first-time homebuyer exception” allowing penalty-free withdrawals from IRAs, but it does not apply to 401(k) plans.
Q: What are the potential benefits and drawbacks of the plan?
A: The potential benefits of the plan include making homeownership more affordable for Americans and allowing people to tap into their retirement savings for a down payment. However, there are concerns about the potential impact on retirement savings and the possibility of hurting savers later in retirement.
