The Roth conversion ladder

Use lower-income years deliberately

In years between work and later income sources, converting traditional retirement money to a Roth IRA can use tax brackets that would otherwise be empty. A taxable conversion is ordinary income in the year it occurs and reduces the traditional balance exposed to future RMDs.

A ladder repeats planned conversions across several tax years. A bracket ceiling can be one constraint, but the amount also has to account for other income, deductions, Medicare IRMAA, and marketplace premium-tax-credit eligibility.

Measure the tax across every bracket the conversion fills

A conversion sits on top of other ordinary income. If it crosses a bracket boundary, part is taxed at one rate and the remainder at the next rate.

The relevant conversion cost is the extra federal tax caused by the conversion divided by the amount converted. The Roth conversion calculator integrates the tax across that span instead of multiplying the full amount by only the top rate.

Worked 2026 example: a single filer under 65 with $80,000 of other gross ordinary income takes the $16,100 standard deduction, leaving $63,900 taxable before conversion. A $60,000 fully taxable conversion fills $41,800 at 22% ($9,196) and $18,200 at 24% ($4,368). Extra federal tax is $13,564, or 22.61% of the conversion, not $14,400 at a flat 24%. This excludes credits, capital gains, IRA basis, state tax and benefit changes. Compare conversion amounts.

Keep the two five-year rules separate

Each taxable conversion has its own five-tax-year period when determining whether an early distribution of converted principal may face the 10% additional tax before age 59½. That conversion clock is one reason an early-retirement ladder is planned years ahead.

A different five-year rule helps determine whether Roth IRA earnings are part of a qualified distribution. The earnings rule generally begins with the first tax year for which you made a contribution to any Roth IRA. The two clocks answer different questions.

For a calendar-year taxpayer, a conversion made at any time in 2026 starts its conversion clock on January 1, 2026; the five tax years are 2026–2030, and that converted principal clears this clock on January 1, 2031. A 2027 conversion clears on January 1, 2032. Reaching 59½ or another applicable exception can change the additional-tax result before those dates.

Roth IRA distributions generally come from regular contributions first, then conversions oldest first (taxable portion before nontaxable portion within each conversion), then earnings, aggregated across Roth IRAs. Clearing a conversion clock does not make earnings tax-free: a qualified earnings distribution also needs the Roth IRA five-year period plus age 59½, death, disability or the limited first-home exception. Keep contribution and conversion records.

A five-year spending bridge, year by year

Illustration: stop work at 45 in 2026, spend $40,000 each calendar year, and convert $40,000 annually from a fully pretax IRA without withholding from the conversion. Assume no earlier Roth contributions or conversions, no investment gains or losses, no inflation and no other income. The table below tracks only principal, not investment earnings, and assumes each available $40,000 conversion is spent that year. It is not a whole-life plan or a recommendation.

The first five spending years, 2026–2030, require $200,000 outside these new conversions: 5 × $40,000. Cash, taxable savings or existing regular Roth contribution basis may provide a bridge, but selling taxable assets can itself create income. In 2031 the 2026 converted principal becomes available under the conversion-clock rule; in 2032 the 2027 principal follows. Continuing conversions funds later rungs, not today's spending.

Conversion taxes need separate funding. With no other income, a single filer under 65 converting $40,000 in 2026 has $23,900 taxable after the $16,100 standard deduction: $12,400 × 10% + $11,500 × 12% = $2,620 federal tax before credits. Holding those 2026 rules constant purely for illustration adds $13,100 for five conversions, making the initial spending-and-federal-tax bridge $213,100. Future brackets, investment income, state taxes, health insurance and inflation will change it; the $200,000 spending bridge alone is not enough to fund both spending and taxes.

Watch the income thresholds a conversion can cross

Conversion income can push Medicare MAGI into a higher IRMAA tier two years later. Before Medicare eligibility, it can also change or eliminate a marketplace premium tax credit under the rules for that coverage year.

Check those effects separately with the IRMAA calculator and ACA subsidy calculator. They are not included in the Roth conversion calculator result. These examples are educational, not personalized tax or investment advice; confirm ordering, basis and exceptions with a qualified professional before converting or withdrawing.

Compare a ladder with other early-access routes

A conversion ladder requires taxable conversions and waiting periods. A 72(t) substantially equal periodic payment plan is a different route that can permit earlier withdrawals but requires a continuing payment schedule under IRS rules.

Neither route is reversible in the way a simple cash-flow estimate is. Confirm account eligibility, ordering rules, and the tax consequences for the specific plan before acting.