Trump plan for 401(k) withdrawals may reshape housing demand

"Since the election, the stock market has set 52 all-time high records that's in one year, 52 records adding $9 trillion in value to retirement accounts, 401(k)s and people's savings. People are doing very well. They're very happy with me. Under current rules, consumers can withdraw from a 401(k) without penalty at age 59 or at 55 if they leave or lose their job. Early withdrawals generally trigger a 10% penalty and the amount is taxed as income."

"White House National Economic Council Director Kevin Hassett confirmed on Friday that the administration was actively working on a proposal to waive that penalty for home purchases. 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), Hassett said in an interview with Fox Business Network. Then your 401(k) will grow over time as the value of your house grows. More money for retirement and you'll have solved the liquidity constraint problem and gotten yourself a house early in life."

"Any changes to 401(k) withdrawal rules would require congressional approval, industry experts note. But if enacted, the policy could materially increase homebuyer demand and have consequences for home prices. A recent NerdWallet survey found that 22% of Americans planning to buy a home in the next 12 months expect to tap their own or a partner's retirement savings for a down payment. If making it easier to use 401(k) withdrawals for down payments pulls more buyers into the market, then yes, that competition could certainly push home prices up, said Kate Wood, NerdWallet's lending expert."

The stock market set 52 all-time highs in one year, adding about $9 trillion to retirement accounts, 401(k)s, and personal savings. Current rules permit penalty-free 401(k) withdrawals at age 59 or at 55 after job separation; early withdrawals incur a 10% penalty and are taxed as income. The administration is working on a proposal to waive the 10% penalty for 401(k) withdrawals used for home purchases. Any change would need congressional approval and could materially increase homebuyer demand and affect home prices. Surveys show many prospective buyers expect to tap retirement savings for down payments.

Read at www.housingwire.com