LOS ANGELES — Raiding retirement savings for a down payment on a home can be tempting, especially if you’ve struggled to scrape together enough money to buy. But should you?
Most 401(k) and similar retirement savings plans like Individual Retirement Accounts (IRAs) allow homebuyers to withdraw or borrow a limited portion of their nest egg for making a cash payment toward the final purchase price, but there can be hefty tax penalties and other short- and long-term financial impacts to consider.
“Planning is the name of the game here,” Stephen Kates, a financial analyst at personal finance website Bankrate, said. “Running the numbers, having a solid understanding of what you can financially cover and financially manage is going to be really important before you step into this.”
Years of inflation, high mortgage rates and skyrocketing home prices have made buying a home a major hurdle for many Americans. At the same time, the S&P 500 stock market index has had only five down years between 2005 and 2025, which has helped juice the value of retirement savings accounts.
At Fidelity Investments, the average 401(k) balance based on 24.8 million accounts was $146,400 as of Dec. 31, a whopping 66% gain over a 10-year period, according to the company. And the average IRA balance based on 18.9 million accounts stood at $137,095 at the end of December, a 51% gain since the last day of 2015.
Still, many savers may have a ways to go before their accounts grow enough to fund a home down payment. The median U.S. down payment on a home in December stood at $64,000 , according to an analysis by Redfin.
Compare that to the median balance for 401(k) plans and IRAs as of Dec. 31: $34,400 and $10,476, respectively, Fidelity said. (Median figures tend to skew lower than the average because workers who recently enrolled in a retirement savings plan haven’t had time to build up a balance.)
Last year, it took the typical U.S. household seven years to save for a down payment on a home, down from a peak of 12 years in 2022 but still roughly double the time it took before the coronavirus pandemic, according to an analysis by Realtor.com.
Some 46% of all homebuyers between July 2024 and June 2025 relied on savings to fund their down payment, according to the National Association o