How to use a Roth conversion ladder for tax-free income

A Roth conversion ladder allows early retirees to move tax-deferred funds into a Roth IRA and access the converted amount tax- and penalty-free before 59.5.

Each Roth conversion requires a separate five-year waiting period before you can withdraw it penalty-free.

Building a Roth conversion "ladder" means executing annual conversions so that starting in year six, you unlock a new amount of penalty-free funds to spend.

Doing Roth conversions in low-income years, such as at the start of early retirement, allows you to pay less income tax.

Have a plan to pay taxes on a Roth conversion from savings or a taxable brokerage account and not from your retirement account.

Be aware that having higher income due to a Roth conversion could inadvertently reduce ACA health care subsidies.