What is a Roth conversion ladder?

A Roth conversion ladder is a series of Roth conversions made one year after another. Each year you move part of a traditional IRA, or another pre-tax account, into a Roth IRA, and you pay income tax on the amount you move. What is a Roth conversion? explains a single conversion and how it is taxed.

People use the words for two different plans. The first is for people who stop working before 59½ and want to reach their retirement savings without the 10% additional tax on early withdrawals. The second is for people past 59½ who want to move a pre-tax balance to a Roth IRA one part at a time, in the years before required minimum distributions begin. This page explains both plans, what each costs, and who each fits.

Two rules are behind both plans. Money you convert is taxed once, in the year you convert it, and it is not taxed again when you take it out of the Roth IRA.¹ If you are under 59½, converted money can generally come out without the 10% additional tax only after a five-year wait, and each conversion has its own wait.²

How does a Roth conversion ladder work?

Here is a hypothetical example of the early-retirement plan. Suppose you stop working at 50 in 2026 and convert $40,000 from your traditional IRA to a Roth IRA every year.

The five years are tax years, and they are counted from January 1 of the year of the conversion. A conversion made in December 2026 is treated the same as one made in January 2026.² From 2031 on, one earlier conversion becomes available each year.

The first five years are the hard part. You cannot use any converted money without the 10% additional tax until 2031, so you have to pay for 2026 through 2030 with other money: the mortgage or rent, health insurance, and everything else a paycheck used to cover. That can be savings outside retirement accounts. It can also be regular contributions made to a Roth IRA in earlier years, which can be withdrawn at any age without tax or the 10% additional tax.³

Withdrawals leave a Roth IRA in a fixed order. Regular contributions come out first, then conversions from the oldest to the newest, then earnings.³ The oldest conversion comes out before the newer ones, which is why the plan works. Earnings come out last. Before 59½ they are taxed, and the 10% additional tax can apply to them.³ Our Roth five-year rule calculator shows which of your conversions have finished their wait and what a withdrawal would cost today.

What is the five-year rule for each conversion?

A Roth IRA has two five-year rules, and they are easy to confuse.

The first rule is the one a ladder depends on. Each conversion has its own five-year period, which starts on January 1 of the year of that conversion. If you are under 59½ and withdraw converted money before its period ends, you generally pay the 10% additional tax on the part that was taxed when you converted it.²

The second rule is about earnings. Earnings come out free of tax only when you are 59½ or older and five tax years have passed since the first year you put money into a Roth IRA. This period is counted once. It does not start again with each conversion.⁴

Does the five-year rule apply to a Roth conversion after 59½?

After 59½ the 10% additional tax no longer applies, so the wait on each conversion stops mattering. You can withdraw converted money at any time without tax and without the additional tax.²³

The rule for earnings still applies. For example, if you open your first Roth IRA with a conversion in 2026, at 62, you can take the converted amount out at any time. The earnings on it are tax-free from January 1, 2031.⁴

After 59½, people use the words Roth conversion ladder for a different plan. They convert part of a pre-tax balance each year, in the years between retirement and the start of required minimum distributions, or RMDs. In those years income is often lower than it was during work and lower than it will be once RMDs begin. A Roth IRA has no RMDs while its owner is alive, so each conversion leaves a smaller pre-tax balance for RMDs to be figured from.⁵ Our guide to RMDs explains when they start.

Some couples do this while both spouses are alive for another reason. After one spouse dies, the survivor files as a single person, and the same income can be taxed at higher rates. The widow's penalty explains why.

How much should you convert each year?

Many people convert only what fits under the top of a tax bracket they choose, and stop there. The amount is figured again each year from that year's income.

Here is a hypothetical example under the 2026 rules. A married couple, both 62 and retired, has $600,000 in traditional IRAs and $60,000 of other income, none of it Social Security. Their standard deduction is $32,200, so $27,800 of their income is taxed before any conversion. The 12% bracket on a joint return ends at $100,800 of taxable income. That leaves room to convert $73,000 a year at 12%, which is $8,760 of tax a year.⁶

Filling the 12% bracket takes 11 years, and every converted dollar is taxed at 12%. Filling the 22% bracket finishes in four years, and the tax is 17.4% of the amount converted. Filling the 24% bracket finishes in two years, and the tax is 20.4%. The slower plans convert more dollars in total, because in this example the money still in the IRA grows while it waits.⁶

The plans also differ in what you owe each April. The 12% plan adds $8,760 of federal tax a year for ten years and a smaller amount in the eleventh. The 24% plan adds $79,208 for the first year and $45,539 for the second. Which one you can live with depends on the money you have outside the IRA to pay it.

The faster plans also raise the couple's income, and that has a second cost. In the 22% plan their income is $243,600 in each of the first three years, which is above $218,000, where a joint return's Medicare premiums first rise. Medicare sets each year's premium from the tax return of two years before. The conversions this couple makes at 63 and 64 would raise both of their premiums at 65 and 66, by about $1,148 a year each at 2026 amounts, for Part B and Part D together.⁷

Our Roth conversion ladder planner runs these figures for your own balance, income and bracket, and shows the Medicare tier for each year.

The example uses the 2026 brackets and deduction for every year. It leaves out Social Security, state income tax and capital gains. A real plan is figured again each year.

What does a Roth conversion ladder cost?

The tax, paid sooner. Each conversion is added to your income for the year and taxed at your ordinary rates.¹ You pay that tax years before you would have paid it on a withdrawal. The ladder changes when you pay the tax. It does not remove it.

Money to pay the tax. Tax that is taken out of the amount being moved does not reach the Roth IRA. Before 59½, that part can also be charged the 10% additional tax, because it is a withdrawal that was not converted.⁸

Money to live on. In the early-retirement plan you need five years of living costs from somewhere else before the first conversion can be used.

Medicare premiums. A conversion counts in the income Medicare uses, two years later.⁷

Health insurance before 65. If you buy coverage through the Health Insurance Marketplace before Medicare begins, the premium tax credit is larger at lower household incomes. A conversion adds to your income, so it can reduce the credit.⁹

Social Security. If you are already collecting benefits, the income from a conversion can make more of them taxable.¹⁰ The planner does not count this.

Who does a Roth conversion ladder fit?

The early-retirement plan may fit you if you stop work before 59½, hold most of your savings in pre-tax accounts, and have other money to live on for five years. From 59½ on, the wait is no longer needed.

The plan for the years before RMDs may fit you if you are retired, are not yet taking RMDs, have less income now than RMDs will bring, and can pay the tax from money outside the IRA. It tends to help when the rate you pay on the conversions is lower than the rate the same money would be taxed at later. If you expect your rate to be lower later, converting now can cost more than waiting.

Neither plan fits you if you would have to pay the tax out of the IRA, or if you are under 59½ and will need the converted money within five years.

What goes wrong with a Roth conversion ladder?

These are the mistakes we see most often.

People expect to use the money in the first years. Each conversion has its own five-year wait, so the first five years need other savings.²

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Each conversion has its own five-year wait, so the first five years need other savings.

People start too late, with too few years left before RMDs begin or before they need the money.

People size the year's conversion from last year's income. Something else arrives that year, such as a bonus, a sale or a fund's year-end payout, and the conversion lands in a higher bracket.

People stop after a year or two because of the tax bill each April.

People who retire before 65 and buy their own health insurance lose part of their premium subsidy, because the conversion counts as income.⁹

People under 59½ take out earnings, not only the converted amounts, and owe tax and the 10% additional tax.³

Where we fit in. We integrate tax considerations into your investment strategy and collaborate with estate attorneys and CPAs to ensure your plan is coordinated. We are not a law firm or accounting firm, so we do not provide legal or tax advice. Everything in this material is for educational purposes, based on primary sources. Before taking any action, please consult the appropriate professionals to apply these ideas to your situation.

A Roth conversion ladder is planned over several years and figured again each year. If you would like to look at your own years before RMDs with someone, we are glad to have that conversation.