Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide

Distributions from a Roth IRA are governed by specific ordering rules that dictate how funds are accessed during withdrawals. When a Roth IRA owner takes a distribution, the IRS outlines that contributions are available to be withdrawn first without penalties or taxes, because contributions are made after-tax.

Following contributions, any conversion amounts can be accessed next. These conversions may hold different tax implications based on the time elapsed since the conversion occurred. If the conversion was made within the last five years, it could be subject to penalties if withdrawn before the age of 59½.

Lastly, earnings accumulated in the Roth IRA are the last to be distributed. To withdraw these earnings tax-free, certain conditions must be met, including having the account open for at least five years and being over the age of 59½.

Thus, the correct order of distributions from a Roth IRA is contributions first, conversion amounts second, and earnings last, which aligns perfectly with the answer provided. Understanding this order is crucial for effective retirement planning and tax strategy management.