Encouraging retirement plans to not be retirement plans, whoopee!!

The new SECURE Act allows parents to take penalty-free (but not tax-free) dis­tri­b­u­tions from re­tire­ment ac­counts up to $5,000 within a year of the birth or adop­tion of a child.

That’s called emergency savings not raiding retirement savings and risking the future.


  1. The math is simple at age 35 you take out the $5,000, you are in a 22% bracket, so you lose $1,100 to the FEDS. Then 32 years later at age 67, with just a 5% return you have $23,824 less in your retirement account. DO NOT DO IT!!!

    Liked by 1 person

  2. This is a good idea. It allows flexibility. It allows the account holder to make decisions on his own. It allows the the account holder to put tax deferred money in a potentially high interest accounts. This is a move away from government restrictions.

    The upsides far out weigh the downsides.


  3. Borrow = OK, distribution – not OK.

    Loan not a distribution if repaid. Almost all loans repaid -except for those outstanding at separation.


  4. If you need to borrow from your 401K for adoption, maybe you do not have enough money to raise a child to start with and you should rethink your family planning. What happens when the child needs new shoes, are you going to take a loan or run up a credit card? An unplanned oops with a child is one thing, but an adoption is definitely a planned expense and should not be a reason to raid the 401K.

    It sounds like the government is trying to make those who are subject to automatic 401K enrollments believe that the 401K is just another bank account and you can withdraw money at any ATM.


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