The Roth conversion ladder: bracket-filling, year by year

1. Window vs. ladder

Two ideas often get blurred together. The conversion window is about timing — the stretch of unusually low-tax years between your last federal paycheck and your first RMD at 73, when converting is cheapest. The conversion ladder is about execution — the year-by-year plan for actually moving the money during that window.

You need both. The window tells you when to act; the ladder tells you how much to convert each year, how to keep each year’s tax rate down, and how the 5-year clocks line up. This guide is the execution half: turning a good idea into a multi-year schedule you can follow.

2. What a ladder is

A conversion ladder is simply a series of annual Roth conversions, each sized to fill a chosen tax bracket, repeated over several years. Each year you move a measured amount from your traditional IRA or TSP into a Roth IRA and pay ordinary income tax on it now — at today’s deliberately-managed rate.

Why spread it out instead of converting in one shot? Because taxes are progressive. A single giant conversion would rocket through the 24%, 32%, and 35% brackets; the same total spread across five or six low-income years can stay entirely within the 12%, 22%, or 24% band. The ladder does three things at once: it builds a tax-free Roth bucket, it shrinks the traditional balance your future RMDs are calculated on, and — for early retirees — it starts the 5-year clocks that can unlock income before 59½.

3. Fill the bracket, don’t max it

The core discipline is right there in the name: you fill a bracket. Each year, you convert just enough to reach the top of your target bracket given your other income — then you stop. Here are the 2026 ceilings (taxable income) for the brackets most retirees target:

The right ceiling depends on a comparison: today’s conversion rate versus the rate your money would face later, once RMDs and Social Security stack up. If your RMDs are on track to push you into the 24% or higher bracket in your 70s, converting now to fill the 22% or 24% bracket is usually a clear win — you’re prepaying tax at a lower rate than you’d otherwise face. The 2026 standard deduction ($16,100 single, $32,200 MFJ) sits below all of this, giving you room before taxable income even begins.

4. The 5-year rule per conversion

Here’s the rule that gives the ladder its rungs. Each conversion starts its own separate 5-year clock. If you’re under 59½, you must let a conversion age five years before you can withdraw that converted principal — otherwise a 10% penalty applies to it.

Stack those clocks and you get a ladder of access: convert each year, and five years later each year’s conversion becomes available, creating a rolling stream of penalty-free income. Once you’re past 59½, the conversion 5-year rule stops mattering for penalties — but a separate 5-year rule still governs whether the account’s earnings come out tax-free, which generally requires the Roth to have been open at least five years. For most federal retirees converting in their late 50s or 60s, the earnings rule is the one to track.

5. Build your ladder

Set your traditional balance, your other taxable income, your filing status, and the bracket you want to fill. The planner shows how much you’d convert each year to reach that ceiling, the tax, and how the traditional balance shrinks across the ladder.

6. The early-access version

For those who retire well before 59½ — a law-enforcement officer at 50, a military retiree in their 40s, an early-out fed — the ladder has a second purpose: it builds a bridge of penalty-free income. Because each conversion becomes withdrawable five years later, a ladder started at, say, 50 produces accessible money at 55, 56, 57, and so on, letting you tap retirement savings before the normal 59½ threshold without the 10% penalty.

The catch is the obvious one: you need five years of other money to live on while the first conversions season, plus cash to pay the conversion taxes. That makes the early-access ladder a tool for those with substantial taxable savings already in place. For most federal retirees leaving in their late 50s or early 60s, the ladder is less about pre-59½ access and more about the bracket-filling and RMD-shrinking benefits above — though the two goals can coexist.

7. The traps

A ladder is powerful, but four hazards can erode it — each a reason to size conversions deliberately:

• The pro-rata rule. If you hold after-tax basis anywhere in your traditional IRAs, each conversion is taxed proportionally across pre- and after-tax dollars — you can’t cherry-pick only the after-tax portion.
• IRMAA. Conversion income raises your MAGI, and once you’re 63 or older that can trigger an IRMAA Medicare surcharge two years later. Size conversions with the IRMAA thresholds in view.
• ACA subsidies. If you’re under 65 and buying marketplace coverage, conversion income can sharply cut your premium tax credits — sometimes enough to outweigh the conversion benefit.
• Paying the tax. Pay the conversion tax from outside funds, not by withholding from the conversion — especially before 59½, when withheld amounts can themselves be treated as a penalized distribution.

8. Doing it with TSP money

One mechanical update for feds: as of January 28, 2026 the TSP now allows in-plan Roth conversions from traditional to Roth TSP, so you can convert inside the TSP itself — though it’s still a taxable event in the year you do it. Even so, the classic ladder usually routes through a traditional IRA: roll traditional TSP money to a traditional IRA, then convert to a Roth IRA each year, controlling the amount to fill your bracket — the IRA gives more flexibility and cleaner access to converted principal before 59½. A direct transfer from the traditional TSP to a Roth IRA is also allowed and is treated as a taxable conversion.

Whichever route you take, keep three things in mind: don’t convert money you’ll need to pay the tax with, watch the pro-rata rule once IRA money is in the mix, and remember that conversions are irreversible — the old ability to “recharacterize” a conversion is gone. Build the ladder as part of your whole RMD strategy and your view of how retirement income is taxed, not as a one-off move.

9. Frequently asked questions