Trump’s 401(k) plan tries to fix housing crisis. It's a full-blown retirement disaster

Every fewer years, Washington comes up with a "creative" solution to an affordability occupation that sounds adjuvant connected the aboveground and softly creates a overmuch bigger occupation underneath. 

The latest example? A connection tied to President Donald Trump’s housing affordability docket that would let Americans to pat their 401(k) status savings to money a down outgo connected a home. 

I recognize the intent. Housing affordability is stretched. Home prices are adjacent all-time highs. Mortgage rates are inactive hovering astir 6%. First-time buyers consciousness locked out. COVID-19 buyers can’t spend to commercialized up. Politically, this each sounds similar a win. 

Financially, it’s a unspeakable idea, successful my view. This is the classical lawsuit of robbing Peter to wage Paul and, successful this case, Peter is your aboriginal self.

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Trump's solution to the American imagination is simply a nightmare for those who currency successful portion of their status to bargain houses. (iStock)

Retirement accounts are not piggy banks 

Your 401(k) was designed for 1 purpose. To money decades of income erstwhile you tin nary longer work. It was ne'er meant to treble arsenic a short-term lodging money oregon a argumentation unit valve erstwhile affordability gets tight. 

When you propulsion wealth retired aboriginal of your 401(k), adjacent if it’s labeled a "loan" oregon "special access," 3 brutally damaging things happen:

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• You permanently shrink your status base
• You suffer years and sometimes decades of compounding interest
• Most radical ne'er afloat wage it back

That past constituent matters much than politicians would similar to admit. 

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According to aggregate status studies, a ample percent of 401(k) loans are ne'er repaid due to the fact that of occupation changes, layoffs oregon beingness disruptions. What bash we deliberation volition hap erstwhile idiosyncratic takes a 401(k) organisation for a down outgo connected a home? The likelihood are it volition ne'er ever get paid backmost for retirement. 

Compounding is the Eighth Wonder of the World until you interrupt it

Let’s enactment existent numbers down this. 

If a 35-year-old pulls $50,000 from their 401(k) to bargain a location and ne'er replaces it, that azygous determination could outgo them $300,000 to $400,000 by retirement, assuming semipermanent marketplace averages. That’s conscionable math. 

President Donald Trump gestures arsenic helium arrives to present remarks connected the U.S. system and affordability astatine the Mount Airy Casino Resort successful Mount Pocono, Penn., Dec. 9, 2025. (Jonathan Ernst/Reuters)

And here’s the irony about this. The radical astir apt to usage this connection are the ones who already conflict to prevention consistently. They don’t person excess currency flow. They don’t max retired status plans. So, erstwhile the wealth is gone, it’s gone.

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Housing hazard + status hazard = treble exposure 

Supporters of this thought reason that "homeownership builds wealth." That’s partially true, but it’s besides incomplete successful the fiscal readying equation. 

A location is:

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• Illiquid
• Expensive to support and requires regular ongoing investments
• Highly babelike connected section markets
• Often leveraged with debt

Retirement accounts, connected the different hand, are: 

• Diversified

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• Liquid erstwhile needed successful retirement
• Designed to make income

Using status wealth to bargain a home concentrates hazard alternatively of spreading it. You’re tying your aboriginal fiscal information to 1 plus successful 1 determination astatine 1 infinitesimal successful time.

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One mode to decision the affordability crunch is the astir accepted mode — marriage. (iStock)

This doesn’t hole housing. It masks the existent problem 

The information is uncomfortable close now, but indispensable to review. 

Housing isn’t unaffordable due to the fact that Americans aren’t originative capable with their status money. It’s unaffordable because:

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• Supply is constrained
• Affordable lodging starts are a decennary behind
• Zoning is broken

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• Large institutions are buying up residential homes
• COVID-19 Interest rates reset home prices

Letting radical pat 401(k)s doesn’t hole immoderate of that. It simply injects much request into a breached system, which tin propulsion prices higher and reward sellers not buyers.

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In different words, this connection could marque homes even much expensive while softly hollowing retired status security, putting adjacent much unit connected Social Security. 

It’s a shaky foundation 

Policies that commercialized semipermanent stableness for short-term alleviation astir ever backfire.

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Using status wealth to bargain a home concentrates hazard alternatively of spreading it. You’re tying your aboriginal fiscal information to 1 plus successful 1 determination astatine 1 infinitesimal successful time.

We’ve already watched Americans underfund status for decades. Encouraging them to drain the 1 bucket that really works for them, which is simply a tax-advantaged long-term, automated redeeming program, is going to determination radical backward. 

Homeownership matters.

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Retirement information matters more. 

And nary substance however you formal it up, it’s ne'er a bully thought to rob Peter to wage Paul, particularly erstwhile Peter is the older mentation of you who won’t get a 2nd accidental to hole it. 

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