President Donald Trump’s team is reportedly drafting an executive order on affordability that would push to allow people to dip into their retirement or college savings accounts, without penalties, for a down payment on a home.
The order, first reported by Politico Wednesday, would be focused on making home ownership more accessible and affordable by also including directives aimed at banning large investors from purchasing single-family homes.
But it is unclear how exactly the executive order would allow people to dip into their retirement or college savings accounts, because Congress determines retirement account rules through the Internal Revenue Code.
Federal law mandates that withdrawing from a 401(k) retirement account before age 59½ or a 529 college savings account for non-education expenses incurs a 10 percent tax penalty. There are some exceptions to the rule, though.
The White House declined to confirm or deny the reported drafting, saying, “Until policy announcements are officially made by the administration, however, any reporting about potential action is pure speculation.”
“President Trump pledged to put an end to Joe Biden’s inflation and affordability crisis, and the Administration is constantly exploring new policy actions to do just that,” White House Spokesperson Kush Desai said.
If signed, the order appears to be aimed at fulfilling Trump’s promise to make the U.S. more affordable for citizens – a policy the president has been focused on since Democrats used affordability messaging to outperform Republicans in local elections in November.
Trump is expected to discuss his plans for making housing more affordable at the World Economic Forum in Davos later this month, he said on Truth Social Wednesday. The president teased his plan to make housing more affordable in his post by taking steps to ban large institutions from purchasing single-family homes.
The president could direct Congress to create another exception to the withdrawal rule or ask the Treasury Secretary to consult with the Office of Tax Policy to create a new recommendation for early distributions to pay for a down payment.
Some members of Congress have signaled support for changes to retirement withdrawal accounts.
Republican Senator Josh Hawley, of Missouri, voiced support for Trump’s plan to ban large investors from purchasing single-family homes, saying, “For years, Wall Street has used your 401k money to buy single family homes. We should ban them from doing it - but allow you to use your 401k to help you buy a home, without penalties or caps or taxes.”
While people may not withdraw early from 401(k)s or non-qualified withdrawals from 529s, the tax code does permit first-time homebuyers to withdraw up to $10,000 from other retirement accounts, such as a traditional or Roth IRA, SEP and other accounts.
