Yes. A legal adoption or the birth of a child is considered an exemption, too. You can use funds from your individual retirement account (IRA) penalty free for an adoption. If you adopt (or give birth to) a child, you can withdraw funds from your IRA if it’s within the first year after the date when the adoption was finalized (or the baby’s birth date). The maximum amount that you can withdraw is $5,000 per adoption or birth.