A Roth IRA conversion ladder is a multiyear strategy that allows savers to tap into their retirement accounts without penalties before reaching age 59½.

With a Roth conversion ladder, money is shifted from a tax-deferred retirement account—such as a traditional IRA or 401(k)—into a Roth IRA. But unlike a standard Roth IRA conversion, it’s done multiple times over several years. The staggered conversions create the “ladder.”

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
When you do a Roth IRA conversion, you must wait five years to withdraw the converted amount to
avoid a 10% tax hit. There’s a separate five-year waiting period for each conversion; by doing a
conversion every year for several years, you create a “ladder.”…(read more)

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