Penalty-Free Retirement Withdrawal To Grow Your Family Adoption Or Assisted Reproduction
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which was signed into law on December 20, 2019, represents a significant overhaul of retirement rules in more than a decade. Among many important changes, the SECURE Act allows you to use retirement savings to start or grow your family!
The SECURE Act allows for penalty-free withdrawals from your retirement account, up to $5,000 per parent, within a year of your child’s birth or your adoption of a child into your family. This change allows you to avoid the 10% penalty typically assessed on early retirement withdrawals.
If you and your spouse withdraw $5,000 each from your separate retirement accounts, you will save $1,000 in penalties typically assessed. For families choosing to adopt, this savings is in addition to the Adoption Tax Credit of $14,300 per child for 2020 (with phase out tied to higher adjusted gross incomes).
Regardless of which path you choose to grow your family, penalty-free retirement withdrawals is another option to fund the journey whether through adoption or assisted reproductive technologies, such as use of a donor or gestational surrogate.