Buying a Home in the US Using Retirement Savings: Trump’s New Initiative

US President Donald Trump is set to announce a new initiative that would allow part of retirement savings held in 401(k) plans to be used for a down payment on a home purchase, Bloomberg reports. The plan is expected to be unveiled at the World Economic Forum in Davos. The move fits into the administration’s broader strategy aimed at lowering borrowing costs and expanding Americans’ access to the housing market.

What Is Being Proposed

401(k) plans are employer-sponsored retirement savings programs in the US, funded through contributions from employees and employers and designed for long-term saving. National Economic Council Director Kevin Hassett said that participants would be allowed to use part of these funds for a down payment when buying a home. As an example, he described a model in which a buyer puts down about 10% of a home’s value, while an equivalent share of equity in the property is recorded as an asset within the 401(k). This approach would allow the retirement account to grow alongside the value of the home, rather than turning the use of savings into a permanent withdrawal.

At present, using 401(k) funds to purchase a home is already permitted, but such transactions are tightly restricted and financially burdensome. They are typically accompanied by fees and tax liabilities, especially for younger savers, leaving this mechanism largely inaccessible for most households.

US consumer confidence remains under pressure

Market Conditions

High housing costs remain one of the key economic challenges in the US as the country heads toward midterm congressional elections in November. After the pandemic, home prices surged and mortgage rates nearly doubled, significantly reducing housing affordability for a broad range of households and leading to weaker market activity.

Reuters reports that in December 2025, existing home sales rose to a seasonally adjusted annual rate of 4.35 million units — the highest level since February 2023 and above analysts’ expectations. However, volumes remain below pre-pandemic levels, while housing supply continues to be constrained.

The National Association of Realtors notes that activity in the secondary market in 2025 fell to its lowest level in three decades, while the median home price exceeded $414,400. This continues to create barriers for buyers, particularly first-time purchasers. A combination of cheaper mortgage financing and expanded options for down payments is viewed as a way to gradually improve the situation.

Lower Borrowing Costs

At the same time, the White House is advancing measures to reduce the cost of borrowing. Donald Trump has instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities in an effort to make 30-year fixed-rate loans more affordable. Markets have already reacted to the decision, and a narrowing spread on mortgage rates is seen as a factor that could help revive housing demand.

Another element of the economic agenda is a proposal to cap credit card interest rates at 10%. The initiative has triggered strong opposition from major financial institutions, but the administration is holding talks with banks on ways to expand access to credit for borrowers with stable incomes but limited credit histories.

Implementation Without Congress

The launch of new financial solutions is being discussed that could be implemented without legislative changes and on a voluntary basis by banks. These instruments would target clients with steady incomes but insufficient credit histories, who do not fit standard banking criteria or the high-risk lending segment.

Kevin Hassett also said that implementing parts of the initiative, including new credit products, would not necessarily require congressional approval. Banks could offer such solutions voluntarily if they consider them commercially viable and consistent with the current regulatory environment.

He also acknowledged uncertainty surrounding the preparation of a second bill under the budget reconciliation process in 2026. The final decision will depend on the level of support within the Republican Party, including Senate Majority Leader John Thune and House Speaker Mike Johnson.

Retirement Risks

Financial planning experts warn about the risks associated with using retirement savings to buy a home. Even if the rules are changed, such decisions could undermine long-term financial security, as early withdrawals from 401(k) accounts are linked to tax penalties and the loss of compound growth — a key foundation of retirement income.

Another concern is declining confidence in retirement prospects. According to Investopedia, about one-third of 401(k) holders doubt their ability to accumulate sufficient retirement savings amid high inflation and rising costs for housing and healthcare.

Analysts at International Investment note that the proposed measures may temporarily expand access to the housing market while simultaneously increasing structural risks to the retirement system. With property prices remaining high and confidence in retirement savings weakening, using 401(k) funds to buy homes could shift financial risks from today’s housing market to households’ long-term financial future, making the balance between housing accessibility and savings sustainability a key issue for economic policy in the years ahead.