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Kevin Hassett, director of the National Economic Council, told Fox Business News on Jan. 16 that the administration planned to “allow people to take money out of their 401(k)s and use that for a down payment.” He said President Donald Trump planned to roll out a final plan to this end at Davos.

Trump ultimately did an about-face on the proposal when asked about it at Davos, telling reporters he wasn’t “a huge fan” of letting 401(k) plan participants use some of their savings to put down a deposit for a home. “I’m so happy with the way 401(k)s are doing,” he added.

Homebuying > retiring? Currently, 401(k) participants must pay an additional 10% tax on funds withdrawn from their account before the age of 59-and-a-half—also known as an early distribution—for any number of reasons, including buying a home. Rules are different under Individual Retirement Accounts (IRAs), which allow qualified first-time homebuyers to withdraw up to $10,000 without incurring the 10% penalty.

Some employers allow workers to take out a loan from their 401(k) account balance in order to purchase a home. Under current IRS regulations, this loan can’t exceed 50% of a participant’s vested balance, or $50,000.

Workers were already taking advantage of such options before Hassett floated this recent policy idea. As of 2024, nearly one-quarter of homebuyers surveyed by Zillow had tapped into their retirement funds (i.e. a 401(k), IRA, or 403(b)) to help finance a down payment.

It’s unclear how the White House proposal would compare to options that are already available, but Hassett told Fox Business the goal would be to help Americans purchase a home, and then put money back into their 401(k) account using equity from that home.

“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 on the home and put it in as an asset in your 401(k), then your 401(k) would grow over time as the value of your house grows,” he said.

Real estate and finance experts questioned the viability of such a plan. “I don’t understand how they are going to do it. There’s no way to allow people to put money back in. You can’t contribute any more than the allowable amount in any one year,” Craig Copeland, director of wealth benefits research with the Employee Benefit Research Institute (EBRI), told MarketWatch.

Allowing potential homebuyers to access previously illiquid assets would likely cause house prices to go up, Jake Krimmel, an economist with Realtor.com, told the outlet. “In the supply-constrained Northeast and Midwest, such a reform could make the affordability issue even worse,” he said.

While Trump pivoted from the proposal Hassett floated, some lawmakers still seem interested in such a plan. Rep. John McGuire, a Republican from Virginia, introduced a bill on Jan. 21 that would allow penalty- and tax-free 401(k) withdrawals for homebuying expenses, like closing costs and down payments.

Historically high prices and a low supply of available homes have made homeownership out of reach for many Americans in recent years. In light of these trends, some employers now offer homebuying benefits to their workers. The food processing company JBS USA, for example, has invested more than $20 million in affordable housing for workers in locations like Cactus Texas, and Beardstown, Illinois. Other employers may help subsidize employees’ down payments or closing costs, or contribute to mortgage buy-downs.

This report was originally published by HR Brew.