Should you use a 401(k) to buy a home? Trump’s ‘not a huge fan’

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

“I am not an enormous fan. Different folks prefer it,” Trump told reporters on Thursday aboard Air Force 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, told Fox Business 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(okay)s are doing so effectively.”

The average 401(k) balance jumped 9% within the third quarter to $144,400 from the identical time a 12 months earlier, in accordance with Constancy Investments. The quantity marks an all-time excessive.

Amongst 126.9 million private-sector employees, 72% have access to a retirement plan at work, in accordance with the Bureau of Labor Statistics. Total, 53% of all employees take part in a plan.

There are already methods for folks to faucet their 401(k) or individual 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 employees with both aim.

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

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

Affordability issues have taken middle stage as households proceed to battle to soak up increased costs. Prices for on a regular basis purchases have jumped greater than 25% since January 2020, in accordance with the consumer price index.

Whereas the president seems to be backing off the thought of utilizing retirement cash to assist residence consumers provide you with down funds, the White Home did problem an executive order Tuesday that requires a ban on massive institutional traders shopping for single-family properties.

Such purchases contain simply 2% of the general market, in accordance with a 2024 report from the Authorities Accountability Workplace, however in some markets these investors own a sizable share. Trump additionally stated earlier in January that he was directing Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed bonds to convey rates of interest on residence loans down.

The nationwide median sale value for a single-family residence was $409,500 in December, up simply 0.4% from a 12 months earlier and down from the file excessive of $435,300 in June, in accordance with the Nationwide Affiliation of Realtors. The common rate of interest on a 30-year mortgage is 6.17% as of Monday, in accordance with Mortgage Information Each day.

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

NAR knowledge exhibits the typical first-time residence purchaser is now age 40 — an all-time excessive, and up from age 33 in 2020.

Given excessive residence costs, amassing a down fee is among the biggest hurdles for potential residence consumers. However even when employees might extra simply faucet their retirement accounts for a down fee, they might not have a big sufficient stability to take action.

The perfect is to place down at the very least 20% to keep away from paying non-public mortgage insurance coverage, which is mostly required for mortgages that exceed 80% of the house’s worth.

The median down fee amongst all consumers final 12 months was 19%, in accordance with the Nationwide Affiliation of Realtors. The quantity varies — 10% for first-time consumers and 23% for repeat consumers. This marks the very best median down fee for first-time consumers since 1989 and the very best for repeat consumers since 2003.

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

In the meantime, though the typical 401(okay) stability is $148,153, in accordance with Vanguard’s 2025 How America Saves report, the very best balances are concentrated amongst older savers. Youthful employees — those that are sometimes first-time residence consumers — are likely to have decrease 401(okay) balances.

Within the 25-to-34 age group, the median 401(okay) stability is $16,255 — which means half are increased, and half are decrease. The common stability is $42,640, in accordance with Vanguard’s 2025 How America Saves report.

For 401(okay) savers ages 35 to 44, the median stability is $39,958, and the typical 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 belongings resembling 401(okay)s, IRAs or shares, and 22% obtain assist from household or mates, in accordance with the NAR.

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

Loans sometimes should be repaid inside 5 years, though your employer may allow a longer repayment term when the proceeds are used to buy a house that is your main residence.

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

Moreover, if you happen to go away your employer, the mortgage could develop into due nearly instantly and regarded a taxable distribution in case you are unable to repay it, stated Cheng, who can be a member of CNBC’s Monetary Advisor Council.

Individually, in case your 401(okay) plan permits so-called hardship withdrawals — 94% of plans enable them, in accordance with Vanguard — you could possibly take cash out of your account to make use of for the acquisition of your private home, 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 such a withdrawal, in accordance with Vanguard. One other 16% had been used to fund a house buy or restore.

Moreover, when you’ve got a Roth IRA — whose contributions will not be tax-deductible however the positive aspects and withdrawals are tax-free in retirement — you may typically withdraw your contributions at any time with out tax or penalty. For earnings, nevertheless, there might be a tax and/or penalty.

Whereas some folks do use their retirement financial savings to buy a home, it is essential to keep in mind that the aim of homeownership must be seen within the context of a bigger plan, specialists say. While you withdraw out of your retirement account, you not solely scale back the stability but additionally miss out on the positive aspects that the cash would have made because of compounding curiosity.

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