Retirement savings plans can be used to fund a home down payment. But should you?

Core Insights - The article discusses the implications of using retirement savings for home down payments, highlighting the potential tax penalties and financial impacts involved [1][2] Retirement Savings and Home Buying - Many retirement plans, including 401(k)s and IRAs, allow limited withdrawals for home purchases, but this can lead to significant tax penalties and financial consequences [1] - The average 401(k) balance at Fidelity Investments was $146,400 as of December 31, reflecting a 66% increase over the past decade, while the average IRA balance was $137,095, a 51% increase since the end of 2015 [3] - The median U.S. down payment on a home was $64,000 in December, compared to median balances of $34,400 for 401(k) plans and $10,476 for IRAs, indicating many savers may not have sufficient funds for a down payment [4] Time to Save for Down Payments - The typical U.S. household took seven years to save for a down payment in the previous year, a decrease from 12 years in 2022, but still significantly longer than pre-pandemic times [5] Funding Sources for Down Payments - Approximately 46% of homebuyers from July 2024 to June 2025 used savings for their down payments, with 59% of first-time buyers relying on this method [6] - Only 6% of all homebuyers and 11% of first-time buyers accessed their 401(k) or pension funds for down payments, with an additional 3% using IRA funds [7]