SECURE Act: Penalty-free Withdrawals from Retirement Plans for Individuals in Case of Birth or Adoption (Section 113)

The SECURE Act contains a number of provisions aimed at expanding Americans’ access to their retirement accounts. One such new viable option adds an exception under which 401(k) participants and IRA owners can withdraw up to $5,000 for expenses related to a qualified birth or adoption. Under the arrangement, the 10% early withdrawal penalty is waived, but applicable income taxes (including capital gains taxes) still apply at the individual’s ordinary income rate.

The new provision is effective for distributions made after December 31, 2019. However, in order to qualify for the exception, the distribution must be made during the one-year period beginning on the date on which the living child is born (stillborn children don’t qualify) or the adoption (adoptees must be under 18) is finalized, which means it can’t be used for costs incurred leading up to a planned birth or adoption.

New parents can opt to repay the withdrawal amount; it is not considered a loan and would be treated as a rollover.

Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at www.schneiderdowns.com/secure-act-ebook.

 

 

Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC).  SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services.  Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2024 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
2024 Cost-of-Living Adjustments for Retirement Plans and IRAs
Incentive Compensation for Construction Industry Employers
Erroneous IRS Form 8955-SSA Penalty Notices
IRS Extends Roth Catch-Up Contribution Effective Date
How Safe Are Your 401(k) Assets?
SECURE 2.0 Act – Section 334. Long-term Care Contracts Purchased with Retirement Plan Distributions
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Pittsburgh

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×