patrick.net

Suggested this to Trump:

https://x.com/patrickdotnet/status/2009377595310158064

Like he listens to me. But still worth a shot.

A first home that in this market they will lose within 5 years.

The idea is that they hold onto it, so the price swings will be irrelevant.

If they fail to make payments, it could be a problem though. House would get sold at auction, and there might be nothing left after paying off the debt.

Patrick says

allow tax-free 401(k)/IRA withdrawals by married couples to spend on their first house

That will raise prices of first homes. A minimum 20% down on loans would bring prices back to actual affordability.

A few loopholes come to mind:

HELOCs: spend the equity now tax free, pay back with tax deferred money later. Triple dipping !!!

Under the table rental incomes: say a few rooms or some extra spaces.

Business deductions if any.

Why don't you just leave California instead?

You should have seen his housing announcement today. Prices will be going up.

He’s a builder, his friends are builders. Their business lives on asset inflation.

What Trump proposed is good; Wall Street was pooling gazillions of dollars and buying up single family houses all over the place.
How would you like to be bidding for a house against BlackRock?

I support Patrick's idea but I don't think people feel any sympathy for retired Americans; on the contrary we're resented.

HeadSet says

That will raise prices of first homes. A minimum 20% down on loans would bring prices back to actual affordability.

Do both. Let people take tax-free withdrawals from 401(k) to put into the 20% downpayment.

Yes, it would put more upward pressure on those starter houses, but would that increase totally negate the benefit of tax-free IRA withdrawls to people who want to buy a first house? I don't know.

Booger says

Why don't you just leave California instead?

Been here since 1997, so most people I know are here.

It's kinda hard to go somewhere new where you don't know anyone.

floki says

HELOCs: spend the equity now tax free

Let's say it's forbidden to borrow against the money you took out of the 401(k).

Though actually, it's already legal to borrow $50K against your 401(k) if your plan administrator agrees to allow it.

floki says

Under the table rental incomes: say a few rooms or some extra spaces.

I don't have a problem with that. If couples want to help offset the cost of owning by renting out a room, God bless them - as long as that house is the couple's sole residence.

It's already legal to buy a rental house with your 401(k) or other IRA. But the IRS says that you cannot live in it. That's what I want to change.

Patrick says

it's already legal to borrow $50K against your 401(k)

Or how about this idea: allow unlimited borrowing against your 401(k) to buy a first house. Then the interest payments literally go back into your 401(k).

If they wanted affordability they’d remove 30 year government backed mortgages. But they are in business of inflation.

Entire system is just inflation. Markets doubled last 5 years, it’s all inflation. And most Americans like boiling frogs watch it and accept it as normal.

Patrick says

The idea is that they hold onto it, so the price swings will be irrelevant.

No I mean a 500K+ mortgage for your average middle class family working at the company store, is a hard mortgage to see to term.

FortWayneHatesRealtors says

Markets doubled last 5 years, it’s all inflation.

Note that this pushes people into higher tax brackets, increasing government revenue.

So government directly benefits from inflation. The people lose.

This is why we need real metal silver by weight as currency, not "dollars" or other bullshit that can be redefined to be a smaller weight of silver.

Call it "The Pound" and make it literally one pound of pure silver. Inflation would end overnight, and the people would have the power to preserve their earnings.

Patrick says

Patrick says

it's already legal to borrow $50K against your 401(k)

Or how about this idea: allow unlimited borrowing against your 401(k) to buy a first house. Then the interest payments literally go back into your 401(k).

Right but the availability of that 50K loan is up to the plan (you already said that), is to be paid back to yourself with POST tax income, and only as long as you're with the same employer. Note the double taxation, I'll get back to that.

The HELOCs would be similar to that 50K loan, as in borrowing against your funds except now against the home, but the payments go to the note holder instead of to the owner, while it's spent by the owner, tax free. The gov will need a way to track those notes and payments somehow so can be taxed in the future.

Same for under the table rental incomes, which not only is being made tax free but on a property paid for by tax deferred financing.

The big issue here how the deferred taxes in an IRA are managed so they can be collected in the future. That is the reason for not allowing living in an investment property bought with IRA money because it's being spent tax free by living in it.

For the unlimited loan method, as it is today, if the payments are made with post tax money, and taxed at distribution, the double taxation could make it a very expensive mortgage. Also, another big issue to me is refinancing. You will not be able to enjoy potentially cheap market rates since the loan is funded by yourself.

floki says

HELOCs: spend the equity now tax free

You cannot "spend equity" unless you sell. You did not pull equity just because the house was collateral; you merely got a loan that must be paid back with interest and likely had closing costs. No different that claiming a "tax free signature loan" or claiming "unused wallet equity" with the remaining balance on your credit cards. Loans are always "tax free."

HeadSet says

floki says

HELOCs: spend the equity now tax free

You cannot "spend equity" unless you sell. You did not pull equity just because the house was collateral; you merely got a loan that must be paid back with interest and likely had closing costs. No different that claiming a "tax free signature loan" or claiming "unused wallet equity" with the remaining balance on your credit cards. Loans are always "tax free."

Hmm, HeadSet, signing up for HELOC(s) does not require selling or refinancing as long as total loan to value ratio is up to about 75-80%, which is the equity in question. I'm in CA so I don't know if it's different elsewhere. And the holder of that credit line becomes secondary lienholder of that property,
as you say.

My point about it being tax free is, that credit line (the borrowed equity) is not taxed, i.e it is not an income but it is still money to be spent. Yes, it is a debt collateralized by the home that must be repaid with interests of course.

Even better would be cashout refinance plus HELOCs, all tax free! During bull market conditions people made a killing flipping with this strategy, especially in CA because of crazy amount of equity.

So we can add cash out as another possible loophole to IRA financed property.

Patrick says

FortWayneHatesRealtors says

Markets doubled last 5 years, it’s all inflation.

Note that this pushes people into higher tax brackets, increasing government revenue.

So government directly benefits from inflation. The people lose.

This is why we need real metal silver by weight as currency, not "dollars" or other bullshit that can be redefined to be a smaller weight of silver.

Call it "The Pound" and make it literally one pound of pure silver. Inflation would end overnight, and the people would have the power to preserve their earnings.

That’s what convention of states is for. To force balanced budgets. They print away inflation, Trump does too. It’s insanity.

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

But, I'm wondering just how the rise in price of a dozen eggs hurts me while my net worth rose millions in 5 years?

clambo says

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest.

HeadSet says

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest

As long as they start with their own pension plans, the plebs won't mind.

HeadSet says

clambo says

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest.

The probability of this happening is less than aliens arriving to the Earth tomorrow and giving everybody an anal probe. As in: find something better to worry about.

Trump was ahead of me on this! I suggested it on the 8th (see date on this post) but on the 7th he had already proposed it:

https://www.coffeeandcovid.com/p/the-hard-way-saturday-january-10

On Wednesday, Politico ran an unintentionally encouraging story headlined, “Trump team drafting executive order on affordability.” According to people familiar with document, “The White House is drafting an executive order targeted at frustration with the cost of living, including allowing people to dip into their retirement and college savings accounts for down payments on homes.”

Senator Josh Hawley (R-Mo.) explained the elegant logic in allowing Americans to use their own retirement savings to fund home purchases. “For years, Wall Street has used your 401k money to buy single-family homes,” Hawley tweeted. “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.”

https://www.politico.com/news/2026/01/07/trump-team-executive-order-affordability-00715643

Patrick says

allowing people to dip into their retirement and college savings accounts for down payments on homes.”

People have long been allowed to withdraw IRA money penalty free to buy a first house for themselves or certain relatives. Was limited to $10k though.

Patrick says

Trump was ahead of me on this! I suggested it on the 8th (see date on this post) but on the 7th he had already proposed it:

https://www.coffeeandcovid.com/p/the-hard-way-saturday-january-10

On Wednesday, Politico ran an unintentionally encouraging story headlined, “Trump team drafting executive order on affordability.” According to people familiar with document, “The White House is drafting an executive order targeted at frustration with the cost of living, including allowing people to dip into their retirement and college savings accounts for down payments on homes.”

Senator Josh Hawley (R-Mo.) explained the elegant logic in allowing Americans to use their own retirement savings to fund home purchases. “For years, Wall Street has used your 401k money to buy single-family homes,” Hawley tweeted. “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.”

https://www.politico.com/news/2026/01/07/trump-team-executive-order-affordability-00715643

The "without penalty or caps" part sounds easy enough to implement but I find the "without tax" part impossible to do without screwing the owner somehow, as govs always do. Let's say a scheme in which fed and state gov owning some percentage of shares in the property in perpetuity plus various restrictions etc...

Why? Seems easy enough to me.

Though I do think there should be the restrictions that it should be a first house, and if you sell it, you have to put the money back in the 401(k) or in a next house.

The primary goal is family formation, and the secondary is to prevent just blowing the money.

Welcome to being an adult. You want your 401k money for your first house, take it. There are already laws in place that allow it, but don't think you don't have to contribute to society. I had to pay my $100k tax bill to get at my 401k for my first house. Life isn't free.

Government needs to stop propping house prices with fed backed mortgages. That’ll make housing affordable again.

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

True, even letting people use their own money to buy a house is yet another boost to the demand side, not the supply side.

I think it's the best of the demand-side answers, but the best answer is to build more housing where the jobs are.

Patrick says

Why? Seems easy enough to me.

Though I do think there should be the restrictions that it should be a first house, and if you sell it, you have to put the money back in the 401(k) or in a next house.

The primary goal is family formation, and the secondary is to prevent just blowing the money.

Because living in it would be tax free and I find it difficult for the govs to allow anything tax free without screwing the owner somehow, no matter how right the goals you listed are.

Not entirely tax-free, because there would still be property tax, and probably state income tax on the 401(k) withdrawal.

And ultimately, the sale of the house (or the 401(k) money re-deposit) would be income subject to federal income tax. Though there is a $500K exclusion on that at the moment.

It seems reasonable to me to allow tax-free withdrawals to buy a house. There is already a tax deduction for mortgage interest.

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

Patrick says

There is already a tax deduction for mortgage interest.

Yes, an abomination that helps inflate house prices, but no benefit tax wise to lower-middle earners. Most folks outside of California do not pay enough mortgage interest to beat the standard deduction. Even a $500k mortgage at 6% barely exceeds the $32,200 standard deduction, and not at all after a few years when the std deduct increases and the interest paid decreases.

True, the mortgage interest deduction is a scam. Prices are all adjusted upward to take it into account.

The winners are the banks, which get more interest because there are bigger loans, and boomers, who get the boosted house price.

The losers are young couples who want to buy a house to start a family.

Patrick says

Not entirely tax-free, because there would still be property tax, and probably state income tax on the 401(k) withdrawal.

And ultimately, the sale of the house (or the 401(k) money re-deposit) would be income subject to federal income tax. Though there is a $500K exclusion on that at the moment.

It seems reasonable to me to allow tax-free withdrawals to buy a house. There is already a tax deduction for mortgage interest.

Sure, these existing tax laws such as property taxes, taxes on future distributions, sales proceeds going back to IRA etc.... are well established but that is not the use tax I'm referring to. Living in the home financed with tax deferred money is the 'using it tax free part' I'm referring, and I don't see govs allowing that without getting a piece of it somehow.

Also, mortgage interests deductions are allowed because the interests were paid with POST tax money. But it only has the effect of reducing gross taxable income by the amount of interest and even then, only reduces a small portion of the overall income tax liability, not the entirety of the interests amount. But the 'living in the home case as being tax free use' as I'm putting it, would be akin to deducting 100% of the taxes on the amount used to buy while living in it because no taxes have been paid yet. This is why the current law does not permit living in a IRA financed investment property.

There is only really one way to make FULL use of that IRA/401K tax deferred money as you well know, that is to distribute it and paying the full taxes owed. The net proceeds can then be used without any future restrictions, FULL use. But your proposal is closer in practice to other methods such as loans, IRA financed property, trading in IRA, etc... and they all come with tax and use related restrictions. For example we can use IRA to buy/sell stocks (akin to buying a property) but cannot use the proceeds to rent a property (the living in the home part) unless it's a distribution.

mell says

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

Exactly mell ! That damn 10% penalty is shit, needs to be gone at the very least regardless of reason for distributions.