Trump wants to make housing affordable for Americans — but not using retirement funds
The US housing market is going through one of its most stagnant phases, thanks to a severe housing shortage, which has seen prices skyrocket. Several Americans have backed out of purchasing homes of late, forcing the government to take action. Recently, one of Donald Trump's close aides said that the administration was writing up a plan to allow people to use their 401(k) funds for a down payment. However, the President has revealed that he isn’t a fan of the idea.
Kevitt Hassett, director of the National Economic Council in the White House, claimed that the administration was looking at 401(k)s as a possible option for down payments. If approved, it could help out hundreds of homebuyers in the short term. "We're going to allow people to take money out of their 401(k)s and use that for a down payment," Hassett had said.
However, at the World Economic Forum in Davos, President Trump said that he was not a fan of the idea, even though others in his cabinet might be, as per a USA Today report. "I'm not a huge fan. Other people like it," he said, before adding, "and one of the reasons I don't like it is that their 401(k)s are doing so well." A provision to use retirement funds to buy a house is available in the IRA, but not in the 401(k) scheme.
The President did not make any mention of the plan during his speeches in Davos, but spoke out against it only when he was asked the question. "The housing market's good, but the 401(k)s are doing much better than the housing market. I like keeping their 401(k)s in great shape," he said. "You've got people telling me they're up 88%. And over the period of a year, over a full year, it's going to be close to 100%."
When Hassett publicly revealed the 401(k) plan, he admitted that it was far from being complete. There are concerns over how a withdrawal could affect the account holder in the long term. "What you have to do is come up with a way, so a simple way,” he said. "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."
"As the value of your house grows, you'll be healthy, have more money for retirement, and you'll have solved the liquidity constraint problem and got yourself a house early in life,” the National Economic Council Director added.
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