The following is part 5 of a 5-part series on the SECURE Act.
Under the recently passed SECURE Act, parents can now leverage an additional sum of money to assist in paying off expenses for a newborn baby or an adopted child. New parents are allowed to cash out $5,000 from their 401(k)s. Although much of the SECURE Act’s provisions appear to be geared towards aging workers and retirees, this specific rule is more catered to younger savers. It benefits those aiming to start families of their own. A very significant factor here is that this $5,000 withdrawal from a retirement account (including 401(k)s and IRAs) does not suffer the typical 10% early distribution penalty. To clarify, each parent can take advantage of this $5,000 distribution if they have separate retirement accounts; therefore, a couple could potentially withdraw up to $10,000 without tax penalties.
If you have questions about this change, please give our office a call. One of our advisors at Financial Plans & Strategies will be happy to review your options with you.