08/18/2026
Using Retirement Savings to Buy a First Home: an Economist's Outlook
Under current law, first-time buyers can withdraw up to $10,000 from an IRA without paying the early withdrawal penalty if the funds are used toward a down payment on a home. A proposal in Congress, the Uplifting First-Time Homebuyers Act, would raise that limit to $50,000.
What happens if a household reallocates some of its retirement savings to purchase a home? Let’s compare two scenarios:
In the first scenario, a household keeps $50,000 invested in a stock market index fund. Assuming a typical 10% annual return, that investment would grow to about $129,700 over 10 years, creating about $79,700 in gains.
In the second scenario, that same household uses that $50,000 for the purchase of a first home. However, this is not the same as buying a $50,000 asset. Instead, it is going toward the purchase of a much larger asset through mortgage financing, a key way homeownership builds wealth. When a buyer uses $50,000 for a $400,000 home, appreciation happens on the full value of the home and not just on the down payment. Nationally, the typical homeowner has built nearly $232,300 in home equity over the past 10 years. That is a significant gain compared to $50,000 invested in a retirement account, where returns are earned only on the amount invested.
Using metro-level data across 171 U.S. markets, we examined how much home equity the local typical homeowners gained over a 10-year period. While the size of the gains varied, the gains are not concentrated in just a few high-priced coastal markets. Nearly every part of the country experienced significant wealth accumulation through homeownership.
Read more details at NAR.REALTOR/blogs
