Roth Conversion Ladder
retirementAlso known as: Roth conversion ladder, Roth ladder
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
Each Roth conversion has its own 5-year clock: principal (the converted amount) becomes accessible 5 years later without 10% early-withdrawal penalty. Strategy: convert $40K from Traditional IRA → Roth in Year 1, $40K in Year 2, $40K in Year 3, etc. Five years later, you can withdraw the Year 1 conversion principal penalty-free. By stacking conversions over multiple years, you create a "ladder" of accessible funds. Each conversion is taxed as ordinary income in the year of conversion — so plan conversions in low-income years (e.g., post-FIRE before pension/SS starts).
Use these calculators to apply this concept
Related retirement terms
401(k)
A 401(k) is an employer-sponsored retirement savings plan with substantial tax benefits. 2026 contribution limit is $24,...
Roth IRA
A Roth IRA is an individual retirement account funded with after-tax dollars; qualified withdrawals are 100% tax-free. 2...
Required Minimum Distribution (RMD)
RMDs are mandatory annual withdrawals from traditional IRA, 401(k), and similar pre-tax retirement accounts starting at ...
Social Security
Social Security is the U.S. federal retirement insurance program, funded by FICA payroll taxes. Workers earn benefits ov...
Full Retirement Age (FRA)
Full Retirement Age (FRA) is the age at which you receive 100% of your Social Security benefit. For workers born 1960 or...
← Back to glossary · Suggest an addition: [email protected]