“The plan encourages homeownership while helping overcome the affordability issue; the complexities arise via the lending rules”
Media Contact: Barbara M. Fornasiero, EAFocus Communications; barbara@eafocus.com; 248.260.8466
Royal Oak, Mich.—January 21, 2026—Amid a flurry of news last week was an interesting announcement by President Trump: a proposed plan to allow the use of 401(k) plan money to be used toward the down payment of a home for first-time home buyers. Is it an election year attention grabber or a much-needed opportunity to loosen the grip of a stubbornly tight home market? National employee benefits litigation and ERISA attorney J.J. Conway of Michigan-based J.J. Conway Law believes it could be a good idea, but the devil is in the details.
“This concept has been around for years. Roth IRAs allow a lifetime maximum limit of $10,000 of investment earnings to be withdrawn penalty-free for a first-time home purchase,” Conway said. “President Trump’s plan is similar to this, and it is actually a pretty good idea, but digging deeper into current lending practices, it can get extremely complicated.”
Conway explains that loans from 401(k) plans have been allowed for decades for certain financial needs, but the proposed plan is different in that 401(k) assets may be leveraged to buy a home specifically. It would provide the tax advantage of allowing pre-tax contributions to be used as a downpayment. Currently, such withdrawals would be taken from post-tax funds.
Conway says the following key question would need to be fully answered before any workable plan should move forward.
- How much money can be borrowed?
- Is the borrowing amount proportional to overall holdings?
- Would a house purchased using 401(k) funds be protected from creditors? 401(k) plans typically cannot be claimed by a creditor.
- What happens if there is a deficiency? If the house sells for less than the purchased price, can lenders pursue the shortfall against the owner, ostensibly taking the owner’s 401 (k) investment?
- What happens if a house is in foreclosure – will the 401(k) money be lost?
- How will employers design plans that comply with their fiduciary duties on fees, costs, defrayment, and related issues?
“While the pros of the plan are straightforward – to encourage homeownership and overcome the affordability issue –the complexities of the proposal arise through lending policies and practices. There are myriad established rules and regulations that would need to change to make this simple on the surface idea actually work,” Conway said.
About J.J. Conway Law
An employee benefits litigation and ERISA law firm founded by John Joseph (J.J.) Conway in 1999, J.J. Conway Law represents those seeking full access to the employee benefits they are legally entitled to. The firm has been involved with nationally significant employee benefits, disability and pension cases, including class action lawsuits for such landmark decisions as granting Medicaid-eligible Michigan children with previously denied intensive mental and behavioral health care services; requiring private Michigan insurers to cover autism treatments for children through age 18; and protecting the pension rights of City of Detroit employees, police and firefighters as well as Wayne County employees by holding their trustees accountable for investment decisions. The firm’s motto, Conquer Tomorrow®, is dedicated to making the future more secure for their clients across the United States. Learn more on the firm’s website.
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