A conversion ladder achieves early, penalty-free retirement account access without the rigid multi-year commitment a 72(t) SEPP requires — the tradeoff is a 5-year wait per conversion.
How it works
Each year’s Roth conversion becomes penalty-free (and tax-free, since it was already taxed at conversion) exactly 5 years after that specific conversion — not 5 years from when the ladder started overall. A ladder needs to run at least 5 years before its first rung becomes accessible.
What this does not include
This assumes conversions happen every year without gaps — a ladder that skips a year simply has no rung maturing 5 years after that gap, which affects planning for continuous income needs this calculator’s steady-conversion model doesn’t flag automatically.
How to use this calculator
- Enter the amount converted each year and years the ladder has already been running.
- Enter years until you need to start accessing the funds.
Frequently asked questions
Why does each conversion have its own 5-year clock?
Because the 5-year rule applies to each individual conversion, not the account as a whole — the first conversion you ever make starts your first available rung, and each subsequent year’s conversion starts its own separate clock.
How is this different from a 72(t) SEPP?
A 72(t) SEPP requires a rigid, multi-year payment schedule that’s expensive to break early; a conversion ladder offers more flexibility once rungs mature, at the cost of needing to plan 5 years ahead.
Do I pay tax when I convert or when I withdraw?
At conversion — the whole point of the ladder is that the converted amount is already taxed, so withdrawing it later (after the 5-year wait) is both tax-free and penalty-free.
