After the birth of a child, a parent is allowed to distribute up to $5,000 out of either an IRA or a 401(k) plan. Notice the word “after”. You are not allowed to withdraw the money prior to the child being born. New parents have up to 12 months following the date of birth to process the distribution from their retirement accounts and avoid the 10% early withdrawal penalty.
Exceptions to the 10% additional tax apply to an early distribution from a traditional or Roth IRA that is:
- Not in excess of $5,000 and the distribution is a qualified birth or adoption distribution.
Exceptions to the 10% Additional Tax
What is a qualified birth or adoption distribution See Page 13 Q D-1
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