Roth Conversion Ladder

What Is It

A Roth conversion ladder means converting a portion of a Traditional IRA/401(k) to a Roth IRA every year, then waiting five years before withdrawing that specific converted amount penalty-free — even before the usual retirement age. Done consistently, one “rung” becomes available each year, creating a steady stream of accessible money for someone who’s retired early.

Why It Matters

This is specifically a FIRE-community strategy, built around the gap between retiring early and reaching the age where retirement accounts become freely accessible. You pay ordinary income tax on the amount converted each year — the same as you would with any Traditional IRA withdrawal — but avoid the 10% early-withdrawal penalty entirely, provided you wait the full 5 years per rung.

Converting more than planned? The ACA Subsidy Calculator can show how it affects your subsidy in the same year.

Quick Example

Retire at 45 needing $40,000 a year. Starting now, convert $40,000 from a Traditional IRA to a Roth IRA every year. By year 5, that first $40,000 rung becomes withdrawable penalty-free — and a new rung becomes available every year after, as long as the conversions keep happening on schedule.

Notice what happens in the first four years — no matter how much you convert:

Try It Yourself

Modeling a multi-year conversion ladder against a real timeline is exactly what RetireSmart is built for.

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