Roth Conversion Ladder
Calculator 2026

A multi-year strategy where an early retiree systematically converts portions of a Traditional IRA or 401(k) to a Roth IRA each year — typically at low marginal tax rates because the converter has no W-2 income. After 5 calendar years, each converted dollar (principal — not the earnings on it) can be withdrawn from the Roth without the 10% early withdrawal penalty, even before age 59½.

This creates a 'ladder' of penalty-free access pre-59½. The strategy is the FIRE community's standard mechanism for bridging the gap between early retirement and traditional retirement-account access age.

Each Roth conversion has its OWN 5-year clock for penalty-free access to the converted PRINCIPAL before age 59½. Conversion done in 2026 must remain in the Roth until January 1, 2031 (5 calendar years) for the converted amount to be withdrawable without the 10% early withdrawal penalty.

The clock starts on January 1 of the year of conversion (regardless of when in the year you actually converted). This 5-year rule is SEPARATE from the 5-year rule for tax-free earnings (which starts from your first Roth contribution and applies to earnings).

Each year's conversion has its own clock — hence the 'ladder.'

Mechanics-based answer (not advice): a common framework is to fill the 0%, 10%, and 12% federal brackets without spilling into the 22% bracket. For a married couple filing jointly in 2026 with no other income, this means converting up to $100,800 (top of 12% bracket) plus the $32,200 standard deduction = $133,000 conversion at a blended ~9-10% effective rate.

For singles: $50,400 + $16,100 standard = $66,500 at the same low effective rate. State income tax adds to this.

For anyone under 65 buying marketplace coverage, the ACA subsidy cliff is usually the tighter ceiling: for 2026 coverage there is no premium tax credit at all above 400% of the poverty line ($62,600 for one person, $84,600 for a couple), and a Roth conversion counts in full toward that income. From 63, IRMAA Medicare surcharges (two-year lookback) become the ceiling to watch instead.

No — but the strategy works best when working income is low or zero, because conversion is added to ordinary income and pushes you up brackets. Common scenarios: (1) FIRE retiree with no W-2 income, living off taxable brokerage withdrawals while running the ladder. (2) Sabbatical or career break — fill the bracket during the gap year. (3) Spouse's low income year while one partner is between jobs. (4) Pre-RMD-age retiree with low taxable income converting before RMDs kick in at 73 (SECURE Act 2.0).

Each year is independent — you can convert $0 one year and $100k the next based on that year's tax picture.

Yes, but with a step. 401(k) money doesn't directly convert to Roth IRA — you must first roll the 401(k) into a Traditional IRA (no tax event), then convert from Traditional IRA to Roth IRA (taxable event). Some plans permit direct 401(k) → Roth 401(k) in-plan conversions, but the 5-year ladder rules apply slightly differently for in-plan conversions versus IRA conversions.

Most ladder practitioners use the IRA route. Alternatively, the Rule of 55 (penalty-free 401(k) withdrawals from age 55 if you separate from service in or after the year you turn 55) is a parallel/alternative path that doesn't require the 5-year wait.

You owe the 10% early withdrawal penalty on the converted PRINCIPAL withdrawn (NOT income tax — you already paid that at conversion). The penalty applies only if you are under 59½.

The withdrawal ordering rules (Treas. Reg. §1.408A) are: contributions first (always tax/penalty-free), then conversions (oldest first, each subject to its own 5-year clock + 59½ rule), then earnings (taxable and penalised if you are under 59½; taxable but not penalised if you are over 59½ and within 5 years of your first Roth contribution).

So if you have $50k contributions and $200k conversions in the Roth, you can withdraw $50k freely before considering conversion penalties.

Different trade-offs. SEPP (Section 72(t) Substantially Equal Periodic Payments) lets you withdraw from a Traditional IRA before 59½ without penalty if you take equal payments for 5 years or until 59½ — whichever is LONGER.

SEPP advantages: starts immediately (no 5-year wait), works with any IRA balance. SEPP disadvantages: locked in once started, modification before the end triggers retroactive 10% penalty on ALL prior SEPP withdrawals, less flexibility.

Ladder advantages: full year-to-year flexibility on conversion amount, no commitment, eventual tax-free Roth growth. Ladder disadvantages: 5-year wait before first withdrawal.

Many FIRE retirees combine both: SEPP for year 1-5 income while the ladder fills.

Yes. Catch-up contributions made to a Traditional account are eligible to convert as part of a ladder later. 2026 limits (IRS Notice 2025-67): the 401(k) catch-up is $8,000 from age 50, replaced by $11,250 for ages 60 to 63; the IRA catch-up is $1,100 on top of the $7,500 limit.

SECURE Act 2.0 added a wrinkle from 2026: if your prior-year FICA wages from the plan's employer exceeded $150,000, your 401(k) catch-up contributions MUST be Roth, not Traditional. That shrinks the Traditional pool available for future conversion.

Below the threshold, catch-ups can still go in Traditional.

Yes — most states tax Roth conversions as ordinary income in the year of conversion. Exceptions: states with no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming).

State tax planning is a major reason some FIRE retirees relocate before starting a Roth Conversion Ladder — e.g., moving from California (13.3% top bracket) to Texas or Florida before converting can save tens of thousands per year. Pennsylvania has a unique rule: distributions and conversions of Traditional IRA/401(k) accounts are NOT taxed at the state level, making PA particularly favorable for ladder strategies.

IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge on Medicare Part B and Part D premiums based on MAGI from two years prior. 2026 Part B thresholds (single / MFJ, CMS): no surcharge up to $109,000 / $218,000, rising in steps to the top tier at $500,000 / $750,000 and above. A conversion at age 63 affects Medicare premiums at age 65 (two-year lookback), and those future thresholds are indexed, so they are not known yet.

Crossing a tier by even $1 triggers the full surcharge for the year. Many planners doing conversions in the lookback years model the IRMAA surcharge as an additional ~15-25% marginal tax rate.

The ACA premium tax credit cliff (400% of the poverty line) is the parallel concern before 65.