First Trust Advisors chief economist Brian Wesbury raised hard questions about whether inflation is truly beaten and whether raiding 401(k) savings for home down payments is a smart idea. Speaking on Fox Business’ Varney & Co. in January 2026, Wesbury challenged the growing optimism around falling prices while examining a Trump administration proposal that would let Americans tap retirement funds to buy homes.
Is the Inflation Fight Really Over?
22 The annual inflation rate in the United States was 2.4% for the 12 months ending February, according to U.S. Labor Department data released March 11, 2026. That number is a world away from the 9.1% peak in June 2022. But Wesbury and other economists warn that headline progress hides a deeper story. 23 Mark Zandi, chief economist at Moody’s, put it bluntly: “I don’t get any sense that inflation is decelerating.” 23 He called inflation “stubbornly high, especially for necessities” such as electricity, food, apparel, medical care, and housing.
Lower inflation does not mean lower prices. It means prices are rising more slowly than before. 12Costs for everyday purchases have jumped more than 25% since January 2020, according to the consumer price index. That cumulative hit still stings for families, even if the monthly pace has cooled.
28 In February, the index for shelter rose 0.2% and was the largest factor in the monthly increase, food increased 0.4%, and energy also climbed 0.6%.
Fresh risks are stacking up fast. 23Average gasoline prices hit $3.50 per gallon as of early March, their highest level since 2024, up about 57 cents a gallon, or 19%, in just two weeks. 29The February inflation data was gathered before the United States and Israel launched an attack on Iran, and the two-week conflict has already pushed up energy costs, with those increases expected to show up even more in coming months.
30 Researchers at the Peterson Institute for International Economics argue that the optimism is premature and say it is more likely that inflation will surprise to the upside, potentially exceeding 4% by the end of 2026.
Brian Wesbury inflation analysis 401k home down payment risks 2026
The 401(k) Down Payment Debate Explained
16 The Trump administration proposed allowing Americans to use 401(k) funds for home down payments, as announced by National Economic Council Director Kevin Hassett on FOX Business.
Here is how the idea works in theory:
- Workers would withdraw from 401(k) accounts penalty-free if the money goes toward a down payment or closing costs on a primary home.
- 16 Hassett outlined a concept where a buyer puts 10% down on a home, then places 10% of the home equity back into the 401(k), allowing the retirement account to grow as the property appreciates.
- 15 Rep. John McGuire introduced the Home Savings Act (H.R. 7185) on January 21 to remove penalties and taxes for 401(k) withdrawals used for closing costs and down payments.
15 The bill would amend the Internal Revenue Code to permit penalty-free withdrawals for up to five years when funds are used for a down payment or closing costs on a primary residence. 15 It would also allow an individual to gift those funds to a relative, exempt from gift tax, provided the relative uses the money for a home purchase.
But the president himself pumped the brakes. 19When asked about the proposal, Trump said he is not “a huge fan” because “401(k)s are doing so well.”
Why Financial Advisors Are Worried
12 Financial advisors say using 401(k) money to buy a house should be an option of “last resort.”
The math tells a cautious story. 12For 401(k) savers in the typical homebuying age range of 35 to 44, the median balance is just $39,958. 12Meanwhile, the national median sale price for a single-family home was $409,500 in December, meaning a 20% down payment would be $81,900.
That means a typical buyer in that age group would need to drain more than double their entire retirement savings just to hit the standard 20% down payment.
| Factor | Current Figure |
|---|---|
| Median 401(k) balance, age 35 to 44 | $39,958 |
| Median single-family home price | $409,500 |
| 20% down payment needed | $81,900 |
| Average 401(k) balance overall (Fidelity) | $146,400 |
| 30-year fixed mortgage rate (March 12) | 6.11% |
14 Money withdrawn from a 401(k) is permanently removed, resulting in a loss of both principal and future compound growth in retirement savings. That is the core concern. A $40,000 withdrawal at age 35, left alone, could grow to well over $200,000 by retirement age. 20 The White House’s proposal shows the push and pull between the desire to encourage homeownership and the risks of making it more difficult to save enough money for retirement.
401(k) Balances Are at Record Highs
Even as the debate swirls, retirement account growth has been strong. 31Despite extreme market volatility in 2025, the average 401(k) balance rose by 11% to $146,100, according to new data from Fidelity Investments, which analyzed nearly 25 million accounts. 31It marks the third consecutive year that the average corporate workplace retirement account booked a double-digit percentage gain.
33 The number of 401(k) millionaires in Fidelity’s plans climbed to 665,000 in the fourth quarter of 2025, up from 654,000 in the previous quarter.
But the average tells only part of the story. 33The median balance was just $34,400, which reveals how a small number of high balances pull the average up. Most workers have far less saved than the headlines suggest.
33 Vanguard reports that 6% of workers in its plans took a hardship withdrawal in 2025, up from 4.8% in 2024 and roughly 2% before the pandemic. **That is the sixth straight annual increase**, signaling that many Americans are already tapping retirement funds to cover everyday emergencies.
Housing Affordability Remains a Tough Road
41 The 30-year fixed-rate mortgage averaged 6.11% as of March 12, 2026, up from 6.00% the prior week, though still down from 6.65% a year ago. 19 The current U.S. homeownership rate is 65.3%, as reported by the U.S. Census Bureau, with the average buyer needing an estimated seven years to afford a home down payment, according to Realtor.com. 16 Hassett himself acknowledged the problem: “The typical monthly payment about doubled for an ordinary family buying an ordinary home. And the down payment they needed went from about $15,000 to about $32,000.”
Some brighter signs are emerging. 50A new Zillow analysis found that affordability has improved by more than $30,000 from one year ago, meaning a median-income household can now afford a $331,483 home, the highest affordable price since March 2022.
45 According to the National Association of Realtors, a one percentage-point drop in mortgage rates can expand the pool of qualifying households by about 5.5 million, including about 1.6 million renters who could become first-time buyers.
The tension at the heart of this debate is deeply personal. Millions of younger Americans feel locked out of homeownership while watching their rent checks vanish each month. The idea of using their own retirement savings to escape that cycle is emotionally powerful. But economists like Wesbury remind us that solving one financial crisis by creating another is no real solution. The inflation fight is not over, retirement savings gaps are wide, and housing affordability will not be fixed by a single policy lever. What families truly need is a mix of stable prices, fair mortgage rates, and wages that keep pace with the cost of living. Drop a comment below and share your thoughts on whether tapping a 401(k) for a home purchase makes sense, or whether the risks are simply too high.
