Roth Conversion Ladder Calculator
Roth Conversion Ladder
Plan a multi-year Roth conversion ladder strategy to move traditional IRA or 401k funds into a Roth IRA while minimizing total taxes paid over time.
Formula
Total Converted = Annual Conversion x Years (up to balance); Tax on Conversions = Total Converted x Current Tax Rate; Future Tax Avoided = Total Converted x (1 + Growth)^Years x Future Rate; Savings = Future Tax Avoided - Tax on Conversions
Frequently Asked Questions
What is a Roth conversion ladder?
A Roth conversion ladder is a strategy of converting a portion of traditional IRA or 401k funds to a Roth IRA each year over multiple years. This spreads the tax hit, potentially keeping you in lower tax brackets each year rather than converting everything at once.
When does a Roth conversion ladder make sense?
It is most beneficial during years when your income is lower than usual, such as between early retirement and when Social Security or RMDs begin. Converting during low-income years means paying taxes at a lower rate than you would later.
How long do I have to wait to withdraw Roth conversions?
Each Roth conversion has its own 5-year holding period before the converted amount can be withdrawn tax and penalty free. After age 59 and a half, earnings can also be withdrawn tax-free once the 5-year rule is met.
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