Roth Conversion Ladder

A multi-year strategy of converting traditional IRA dollars to Roth IRA in low-income years to fill up lower tax brackets.

What it actually means

A Roth conversion ladder is a sequence of partial Traditional-to-Roth IRA conversions executed in years where the taxpayer's ordinary income is below their long-term-expected bracket — typically retirement years between separation from work and age 73 (when RMDs begin). Each conversion is taxable as ordinary income in the year of conversion, but the converted dollars then grow tax-free in the Roth and avoid future RMDs entirely. Done correctly across 10-15 years, a ladder can shift hundreds of thousands of dollars from tax-deferred to tax-free at low marginal rates.

Distinguishing it from look-alikes

A Roth conversion ladder is NOT the same as a backdoor Roth (which is for current-year contributions). A ladder is specifically for moving existing Traditional IRA balances to Roth over time, optimized for marginal-bracket arbitrage. Optimal ladder size depends on: (1) current ordinary income from other sources, (2) projected future RMDs and Social Security, (3) state-tax considerations, (4) IRMAA Medicare premium thresholds.

Examples

Retire at 60, no W-2 income, defer SS to 70

Convert $50-100K/yr to Roth at 12-22% bracket vs future 35%+ when RMDs hit

Sabbatical year with no W-2

Convert during the sabbatical to fill the gap year between brackets

Real estate cost-segregation depreciation year

Use the depreciation losses to offset Roth conversion ordinary-income — pay 0% on conversion