Based
on reports from January 2026, the Trump administration has experienced a public
pivot regarding a proposal to allow citizens to use their 401(k) accounts for
home down payments. While a top economic adviser initially floated the
idea, President Trump has since distanced himself from the plan, stating
he is "not a huge fan" of using retirement funds for housing.
Details of the Situation (As of Late January 2026):
The Proposal: Kevin Hassett, director of the National Economic Council, initially stated in mid-January 2026 that the administration was working on a plan to allow people to withdraw funds from their 401(k) accounts for home down payments, potentially without tax penalties.
The Pivot: Shortly after the proposal was floated, President Trump told reporters he was "not a huge fan" of the idea, explaining that he prefers to keep 401(k) balances intact because they are performing well.
Current Status: While the administration appears to be backing away from this specific 401(k) plan, some Republican lawmakers have introduced legislation to permit penalty-free 401(k) withdrawals for homebuying, according to reports from Jan. 21, 2026.
Other Trump Housing Proposals (2026)
Instead of focusing on 401(k) withdrawals, the administration has recently focused on other housing initiatives, including:
Restricting Institutional Investors: Pledging to ban large corporate investors from buying single-family homes.
Lowering Credit Card Interest Rates: Calling for a 10% cap on interest rates for one year to help Americans save for down payments.
Increasing Housing Supply: Pledging to reduce regulatory hurdles to build new homes and making federal land available for development.
While
a proposal was recently discussed within his administration to allow
penalty-free 401(k) withdrawals for a home down payment, President Trump
has publicly stated he is "not a huge fan" of the
idea.
White House economic adviser Kevin Hassett announced the proposal on January 16, 2026, as part of a broader housing affordability agenda. However, during his return from the World Economic Forum in Davos on January 23, 2026, President Trump expressed reservations, citing the strong performance of 401(k) accounts and his preference for keeping retirement savings intact.
Despite the President's public comments, the idea has gained some traction in Congress. Representative John McGuire (R-Va.) introduced the Home Savings Act in the House of Representatives on January 21, 2026, which would specifically allow for penalty-free 401(k) withdrawals for down payments and closing costs.
The Trump administration's other housing policy efforts in January 2026 have focused on different areas, including:
Banning large institutional investors from purchasing single-family homes using government loan products.
Directing
Fannie Mae and Freddie Mac to purchase $200 billion in
mortgage-backed securities to help lower mortgage rates.
Considering
a potential 50-year mortgage option to reduce monthly payments.
Currently, individuals under 59 1/2 generally face a 10% penalty for early 401(k) withdrawals, though first-time homebuyers can withdraw up to $10,000 from an IRA without this penalty.
Norb Leahy, Dunwoody GA Tea Party Leader
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