As has become usual practice, Congress passed some meaningful tax legislation as it recessed for the holidays.
In one of the new meaningful laws, enacted on December 20, 2019, you will find the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
The SECURE Act made many changes to how you save money for your retirement, how you use your money in retirement, and how you can better use your Section 529 plans.
Each week, I present one of the eight game changers of the SECURE Act. In week four, Congress removes the early withdraw penalty for birth/adoption.
You pay no 10 percent early withdrawal penalty on IRA or qualified retirement plan distributions if the distribution is a “qualified birth or adoption distribution.” The maximum penalty-free distribution is $5,000 per individual per birth or adoption. For this purpose, a qualified plan does not include a defined benefit plan.
This change applies to distributions made after December 31, 2019.
Tax tip. A birth or adoption in 2019 can signal the start of the one year, allowing qualified birth and adoption distributions as soon as January 1, 2020.
Next Week: RMDs Start at Age 72