"Ideally, people would have savings to cover these life events, but that is not always possible," Autumn Campbell, a certified financial planner with the Planning Center, tells CNBC Make It. That said, the ability to funnel cash from a retirement account may help some Americans avoid sliding into debt, especially those who would otherwise need to turn to using a high-interest credit card or personal loan. Older millennials (32 to 37) have about $1,000 saved in their 401(k)s.Īdding a new way to drain those funds isn't going to help the situation, Morrissey says. Younger generations do not fare much better. That total reflects almost 30 years of savings. Many times, every dollar counts when attempting to save for retirement.Ī recent report found pre-retirees, Americans 56 to 61, had a median balance of $21,000 in their 401(k) accounts in 2016, which is the most up-to-date data on file. A $5,000 balance today could be worth $57,900 in 35 years, assuming a 7% annual rate of return. There is also an opportunity cost to raiding your retirement savings early. Consider the big picture before simply taking the money For those adopting, the exemption only applies to adoptees under 18. It only applies to living children, stillborn children won't qualify. New parents have a year to take the withdrawal after the birth or adoption of a child and it needs to take place after the child's arrival, which means it can't be used for costs incurred leading up to a planned birth or adoption. Of course, there are some stipulations to when parents can take an early withdrawal, says Jeff Levine, a certified financial advisor and CEO of New York-based Blueprint Wealth Alliance. parents say they've spent money they don't have - borrowing the funds, using credit cards or taking out loans - to provide even these less important items for their kids, according to a Credit Karma survey of 1,000 parents in the U.S. is about $43,000, according to a report from Adoptive Families Magazine.Įven when it comes to non-essential expenses for their children, classified as things such as designer clothes, concerts and organic food, parents are willing to pay. Meanwhile, the average cost of adopting a baby through a private agency in the U.S. Depending on the mother's insurance plan, she'll likely pay out-of-pocket for some portion of the bill. Women who undergo a C-section delivery stay in the hospital an average of three days and are typically billed $47,360. Having a baby or adopting a child is an expensive endeavor these days, one many families struggle to afford.Īcross the country, the hospital bill for vaginal delivery costs an average of $30,570, according to estimates from the independent nonprofit organization FAIR Health.
For any other circumstances, you'd need to pay a 10% early withdrawal penalty, plus taxes on the funds you withdrew. Some retirement plans also allow withdrawals when experiencing a financial hardship, but about 15% of 401(k) plans do not.
Up until now, you could only take withdrawals from your 401(k) before 59½ if you had education expenses, bought a home for the first time, incurred massive medical debts or were required by a court to provide alimony or child support. While new parents can opt to repay the withdrawal amount, this is not a loan and does not need to adhere to the strict 401(k) repayment process. The new rule allows each parent to use the $5,000 exemption, which means a couple could take up to $10,000 out penalty-free if they each had separate retirement accounts. The SECURE Act allows Americans who just had a baby or adopted a child to take a withdrawal of up to $5,000 from their retirement accounts, including a 401(k) or IRA, without the typical 10% penalty. While much of the legislation is aimed at older workers and retirees, there are some benefits for younger savers, including those looking to start families.
The SECURE Act contains a number of provisions aimed at expanding Americans' access to retirement accounts, including raising the age when people need to take minimum withdrawals, giving small businesses the ability to band together to participate in multi-employer 401(k) plans, allowing people to invest in annuities within their 401(k) plans and granting consumers roughly two more years to contribute to traditional individual retirement accounts.