The Down Payment Plan Trump Rejects (Despite White House Support)

The Trump administration was reportedly set to unveil ways to offset the affordability crisis that has forced Americans to make big changes in their financial lives. One of the plans under development was revealed by the National Economic Council Director Kevin Hassett in mid-January 2026, and it would have allowed people to use some of their 401(k) funds to make a down payment on a house. 

But within days of Hassett telling FOX Business Network (via YouTube) that President Donald Trump would "roll out the final plan in Davos," Trump, on board Air Force One returning from Davos, told the White House press corps (via YouTube) he was "not a huge fan of it." He added that "one of the reasons I don't like it is that ... their 401(k)s are up 80%, 90% in some cases ... The housing market is good, but the 401(k)s are doing much better than the housing market. I like keeping their 401(k)s in great shape." 

Trump wasn't the only one who was skeptical of the plan. Chief of Retirement Policy and Regulatory Affairs for the American Retirement Association, Kelsey Mayo, stressed in a National Association of Plan Advisors piece that 401(k) plans "are not designed for the precise, rapid fund deployment required by personal real estate transactions."

As things stand now, cashing out a 401(k) early can come with big consequences in the form of early withdrawal fees and owing additional federal and state income taxes. Withdrawing "early" means taking out some of the funds before reaching the age of 59 ½. Those penalties are part of the reason why personal finance talk show host Dave Ramsey warns never to use a 401(k) to pay off or buy a home. The other reason: funds taken out for a loan aren't being used to build up wealth needed for retirement.

That said, it is possible to borrow money from your 401(k) account to buy a home. Under Internal Revenue Service (IRS) regulations, you are allowed to use up to $50,000 from your 401(k) plan for a loan. If your account has a lower balance, $10,000 or 50% of it — whichever is larger — is the limit. While most 401(k) loans must be paid back within five years, those used to purchase the borrower's principal residence can be repaid over a longer period.   

Under the Trump administration's plan, which has now been thrown into doubt by the president, the money taken out of a 401(k) for a down payment would be replaced by a portion of the home's value, according to Hassett. "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," Hassett told Fox Business News. "As the value of your house grows, you'll ... have more money for retirement ... and you'll have solved the liquidity constraint problem and got yourself a house early in life."

But this mechanism may not be easy to implement. Inserting a portion of a home's value into a 401(k) may require retirement fund operators to regularly appraise tens of thousands of houses, condos, and co-ops across the nation, an endeavor that would be both complicated and expensive, Mayo of the American Retirement Association warned. The 401(k) plan would have to be listed as an owner of the property on the deed, and these records would have to be updated in response to any plan changes.