A Roth conversion ladder is a series of yearly Roth conversions from pre-tax accounts. After five tax years, each converted amount can be withdrawn without the 10% early withdrawal penalty.
It is one way retirees under 59½ may reach pre-tax savings before the usual penalty-free age. For households with $1 million or more in pre-tax accounts, the question often surfaces in the fourth quarter. A conversion counts for 2026 only if it is completed by December 31. Income tax is due on each converted amount in that year. Below, we explain how a Roth conversion ladder works and what to weigh first.
How a Roth Conversion Ladder Works
The idea is to convert a set amount each year, wait five tax years, then withdraw that year’s conversion. Each yearly conversion becomes a “rung.” Once the first five years pass, a new rung may open every year.
How a Ladder Is Typically Structured
- A yearly amount is chosen. It is often sized to a target tax bracket and about one year of spending.
- The conversion is completed by December 31. Funds move from a traditional IRA, or a 401(k) rolled into an IRA, to a Roth IRA.
- Taxes are paid on the converted amount. Some people pay from funds outside the IRA, so more of the converted amount stays in the Roth.
- Bridge assets cover spending for five years. Cash or a taxable account may fund living costs while the first rung’s clock runs.
- The first rung may become available in year six. After that, one rung may become available each year, subject to the five-year rule.
Why the Bridge Matters
The ladder depends on having about five years of spending outside retirement accounts. Without that bridge, converted dollars may be needed before their clocks run out.
The length of the bridge also depends on when Social Security begins. Our Social Security Calculator estimates benefits at different claiming ages. That estimate helps show how long other savings may need to last.
The ladder’s purpose also ends at age 59½. After that age, the 10% additional tax no longer applies to converted amounts.²
A Hypothetical Five-Year Ladder, Year by Year
The table below follows a hypothetical couple converting $150,000 a year for five years. Each conversion fills the 10% and 12% federal brackets and part of the 22% bracket.
The couple is married filing jointly, both age 52 in 2026, and retired. They have no other taxable income and live on cash and a taxable account. Each year uses the 2026 standard deduction of $32,200 and 2026 federal brackets.¹ Future brackets are not yet published, so later years reuse 2026 figures for illustration.
| Year | Age | Conversion | Taxable income | Brackets filled | Est. federal tax | First penalty-free withdrawal |
|---|---|---|---|---|---|---|
| 2026 | 52 | $150,000 | $117,800 | 10%, 12%, part of 22% | $15,340 | Jan. 1, 2031 |
| 2027 | 53 | $150,000 | $117,800 | 10%, 12%, part of 22% | $15,340 | Jan. 1, 2032 |
| 2028 | 54 | $150,000 | $117,800 | 10%, 12%, part of 22% | $15,340 | Jan. 1, 2033 |
| 2029 | 55 | $150,000 | $117,800 | 10%, 12%, part of 22% | $15,340 | Jan. 1, 2034 |
| 2030 | 56 | $150,000 | $117,800 | 10%, 12%, part of 22% | $15,340 | Jan. 1, 2035 |
How the Illustration Works
In 2026, $150,000 minus the $32,200 standard deduction leaves $117,800 of taxable income. The first $24,800 is taxed at 10%, or $2,480. The next $76,000 is taxed at 12%, or $9,120. The last $17,000 is taxed at 22%, or $3,740.¹
Total estimated federal tax is $15,340, about 10.2% of the amount converted. About $93,600 of room remains before the 24% bracket begins at $211,400 of taxable income.¹
State income tax is not included here and is covered below. The couple reaches age 59½ during 2033. After that, the remaining five-year clocks no longer matter for penalty purposes.
This is a hypothetical illustration for educational purposes only. It is not a projection of any person’s taxes. Actual results will vary.
The Five-Year Rule on Each Conversion
Each conversion carries its own five-year clock. The clock starts on January 1 of the conversion year, no matter which month the conversion happens.² A conversion in December 2026 is treated as starting January 1, 2026.
What the 10% Additional Tax Applies To
A converted amount withdrawn within its five-year period, before age 59½, may face a 10% additional tax.² It applies to the part of the conversion that was taxable when converted. Income tax is not charged a second time on that amount. A five-year ladder runs five clocks at once, one for each conversion.
How Roth Withdrawals Are Ordered
Roth IRA withdrawals follow a set order.² Regular contributions come out first. Converted amounts come next, oldest conversion first. Earnings come out last.
Earnings follow a separate rule. They are generally tax-free only after a separate five-year period and age 59½, or another qualifying event.²
Exceptions to the 10% Additional Tax
Several situations may remove the 10% additional tax before a clock runs out.² Common ones include:
- Reaching age 59½
- Death, with the distribution paid to a beneficiary
- Total and permanent disability
- A series of substantially equal periodic payments
- Unreimbursed medical expenses above 7.5% of adjusted gross income
- Health insurance premiums paid while unemployed
- Qualified higher education expenses
- Up to $10,000 for a qualified first-time home purchase
- Up to $5,000 for a qualified birth or adoption
IRS Publication 590-B lists additional exceptions and the conditions for each. A tax professional can help confirm whether one applies.
Trade-Offs to Weigh Before Starting
A Roth conversion ladder changes when taxes are paid. That shift carries costs as well as potential benefits. Four trade-offs deserve close attention.
Tax Is Due in the Conversion Year
The taxable part of every conversion is added to that year’s income and taxed at ordinary rates. A large conversion can move income into a higher bracket. Estimated tax payments during the year may help avoid an underpayment penalty.
Paying the tax from the converted funds reduces what reaches the Roth. The amount withheld is treated as a distribution. Before age 59½, it may also face the 10% additional tax.²
Medicare Premiums and the Two-Year Lookback
Medicare Part B and Part D premiums rise for higher incomes through a surcharge called IRMAA. Social Security generally uses the tax return from two years earlier to set it.⁴ A conversion in 2026 may therefore affect premiums in 2028. This matters most for conversions made at about age 63 or later.
For 2026, surcharges begin above $109,000 of modified adjusted gross income for single filers. For joint filers, they begin above $218,000.³
| 2026 MAGI, single | 2026 MAGI, joint | Part B total monthly premium |
|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 |
| Above $109,000 to $137,000 | Above $218,000 to $274,000 | $284.10 |
| Above $137,000 to $171,000 | Above $274,000 to $342,000 | $405.80 |
| Above $171,000 to $205,000 | Above $342,000 to $410,000 | $527.50 |
| Above $205,000 to under $500,000 | Above $410,000 to under $750,000 | $649.20 |
| $500,000 or more | $750,000 or more | $689.90 |
Part D surcharges range from $14.50 to $91.00 a month in 2026.³ The thresholds for 2028 premiums have not been published. After a qualifying life event, such as stopping work, Form SSA-44 may be used to request a new determination.⁴
State Treatment in Pennsylvania, Virginia and Maryland
Where you live in the conversion year shapes the state tax bill. A move partway through a ladder may change the cost of later rungs.
Pennsylvania.
Pennsylvania generally does not tax a conversion moved by trustee-to-trustee transfer or 60-day rollover.⁵ Amounts not placed in the Roth, such as tax withholding, may be taxable for Pennsylvania purposes.⁵ For many Pittsburgh-area households, this makes state tax a smaller part of the calculation.
Virginia.
Virginia generally taxes retirement income that is taxable at the federal level, including traditional IRA distributions.⁶ Residents 65 and older may qualify for an age deduction of up to $12,000 each. That deduction shrinks as income rises, so a conversion can reduce or remove it.⁷
Maryland.
Maryland taxes conversion income at the state level, and counties levy their own income tax. Maryland’s pension exclusion for residents 65 and older covers income from employee retirement systems. Under current law, IRA income is not eligible.⁸
Lost Tax Deferral
Money used to pay conversion tax today no longer stays invested. In a traditional IRA, that tax would stay deferred until withdrawal.
If tax rates in retirement turn out lower than the rate paid at conversion, the conversion cost more than waiting. If rates turn out higher, the reverse may hold. Future tax rates and personal circumstances are uncertain.
A financial professional and a tax professional can help evaluate these trade-offs together. At YTS, financial, tax and insurance professionals work under one coordinated strategy. That allows conversion decisions to be weighed alongside Medicare, state taxes and cash flow.
Who Tends to Consider a Ladder, and Who May Not
A Roth conversion ladder tends to come up in a specific situation. Outside of it, the ladder’s early-access purpose may matter less.
Situations Where It Often Comes Up
- Retiring in the early to mid 50s, well before age 59½
- $1 million or more in pre-tax accounts, with several low-income years before Social Security or RMDs
- About five years of spending available in cash or taxable accounts
- An expectation of similar or higher tax rates later, such as from RMDs or a surviving spouse filing single
RMDs can raise taxable income later in retirement. Our Required Minimum Distribution Statistics: 2026 covers when they begin and how large they can be.
Situations Where It May Be Less Relevant
- Already age 59½ or older, when the early-access purpose no longer applies
- A need for the converted funds within five years
- Plans to pay the conversion tax from the IRA itself
- An expectation of a lower tax rate in retirement
- Plans to leave pre-tax assets to charity
- Approaching Medicare, where a large conversion may raise premiums two years later
People past 59½ may still weigh Roth conversions for other reasons. Our guide to Roth vs Traditional 401(k) covers related account decisions.
Frequently Asked Questions
What is the deadline for a 2026 Roth conversion?
December 31, 2026. Unlike an IRA contribution, a conversion made after year-end cannot be counted for the prior year.
Does the five-year rule apply after age 59½?
The 10% additional tax on converted amounts does not apply after age 59½.² Earnings still follow a separate five-year rule to be withdrawn tax-free.
Can a Roth conversion be undone?
No. Since 2018, a conversion can no longer be recharacterized back to a traditional IRA.⁹ That makes it important to review the tax cost before converting.
Can the conversion tax be paid from the converted money?
It can, but the withheld amount is treated as a distribution. Before age 59½, it may face the 10% additional tax.² In Pennsylvania, amounts not placed in the Roth may also be taxable.⁵
Will a Roth conversion raise Medicare premiums?
It may. Medicare premium surcharges generally use income from two years earlier.⁴ A 2026 conversion can therefore affect 2028 Part B and Part D premiums.
Talk Through a Roth Conversion Plan With YTS
A Roth conversion ladder touches income tax, Medicare premiums, state rules and cash flow at the same time. YTS Wealth Management provides private wealth management for households across Pennsylvania, Virginia and Maryland. That includes the Pittsburgh region and the Tysons, Virginia area. Our team brings financial planning, tax coordination and investment management together in one relationship. Before December 31, we can review whether conversions fit within your broader plan.
Request an Appointment with YTS
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The hypothetical illustrations do not represent any specific person’s situation, and actual results will vary. This material is not intended as tax or legal advice. Please consult a qualified tax professional about your situation. A Roth IRA conversion is a taxable event. Traditional IRA owners have tax implications to consider before converting. Withdrawals of converted amounts before age 59½ and within five years may face a 10% additional tax. Tax laws and Medicare rules are subject to change.
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.
References
- Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 (IR-2025-103). October 9, 2025.
- Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs).
- Centers for Medicare & Medicaid Services. 2026 Medicare Parts A & B Premiums and Deductibles. November 14, 2025.
- Social Security Administration. Medicare Premiums: Rules for Higher-Income Beneficiaries.
- Pennsylvania Department of Revenue. REV-636, personal income tax treatment of IRAs and Roth IRAs.
- Virginia Department of Taxation. Virginia Taxes and Your Retirement.
- Virginia Department of Taxation. Age Deduction for Taxpayers Age 65 and Over.
- Maryland Department of Legislative Services. Fiscal and Policy Note, HB 707, 2026 Session.
- Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs).
