What is a Roth conversion ladder and why do early retirees use it?

A Roth conversion ladder is a multi-year strategy that moves money from a traditional IRA or 401(k) into a Roth IRA in small annual chunks, so you can access it penalty-free before 59½. Each conversion you make becomes withdrawable tax- and penalty-free five years later, so you start the ladder about five years before you need the cash. Once you retire and your taxable income drops, you convert just enough each year to stay in a low tax bracket — often filling up the 10% or 12% bracket. After the five-year seasoning period, you pull last year's converted dollars to live on while this year's conversion seasons. Done over decades, this can move a large pre-tax balance into Roth at very low rates. Plan the conversion amounts and tax cost at wealthserene.com/tools/roth-conversion.