For younger generations, the American Dream of homeownership is starting to feel less like a milestone and more like a moving target. As prices rise and savings lag behind, buyers are increasingly forced to rethink where the down payment is supposed to come from — with Gen Z even borrowing from family to make things work.
With prices still high and first-time buyers feeling squeezed, the idea of tapping into a 401(k) sounds like a reasonable release valve if family help isn’t an option. However, from financial advisors to President Donald Trump, many are pushing back — and for good reason.
On paper, the math looks tempting. The median single-family home price is roughly $433,00. A 10% down payment is $43,000, which is nearly the median 401(k) balance for first-time homebuyers in their late 30s or early 40s.
But that still masks the problem.
For most younger buyers, retirement accounts simply aren’t large enough to address affordability without creating a new problem. Draining that account to buy a home doesn’t “unlock” ownership — it often just shifts risk from one part of the balance sheet to another.
From an advisor’s perspective, this is less about rules and more about trade-offs. A client who needs to tap retirement funds for a down payment is usually signaling one of three things:
The home may be too expensive for their current cash flow
The timeline is being rushed by emotional or social pressure
Other savings habits haven’t had time to mature
Moving money from a tax-advantaged account into an illiquid asset with ongoing costs doesn’t solve any of these issues — it just trades one challenge for another.
At its core, the problem isn’t access to retirement funds. It’s affordability. Home prices have climbed sharply over the past five years, interest rates remain elevated, and inventory is tight. Allowing easier access to 401(k)s doesn’t change those fundamentals — it just shifts where the strain shows up.
The renewed attention on using retirement savings for down payments highlights how stretched today’s first-time buyers have become. For advisors, it’s a useful data point that signals how far housing affordability has drifted from traditional saving paths.
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