Roth Conversion Ladder by State: The Five-Year Plan Nobody Should Pay $500 For

By Charlie. FIRE'd early 2025.

The Free Strategy That Grew a Price Tag

The Roth conversion ladder was born free. The Mad Fientist published the canonical walkthrough more than a decade ago, open to anyone with a browser, math shown, no email gate. It is still up, still free, and still correct.

Search the term today and you will find what grew around it: FIRE influencers selling "ladder blueprint" spreadsheets for $500 and conversion masterclasses at $1,997, taught by people whose actual retirement plan is your course enrollment. The product under the branding is five sentences and a calendar. I am going to give you the five sentences, the calendar, the tax math, and the state layer, and the bill for all of it is zero.

One disclosure before the math. Four state-specific ladder pages used to sit on this site, and I folded them into this one. A ladder is federal machinery that runs identically in all fifty states, so four pages of it was three pages of padding. The only thing that changes at the state line is the tax bill, and that earns one section near the end, not four separate articles.

The Whole Strategy in Five Sentences

Convert one year of spending money from your traditional IRA to your Roth IRA. Pay ordinary income tax on the converted amount this year. Wait five tax years, after which that converted principal comes out free of tax and penalty at any age.

Repeat every year so a new rung matures every year. Live off something else until the first rung lands.

That is the entire course curriculum. Everything below is execution detail: how the five-year clock really runs, how big to make each rung, what feeds you during the wait, and what your state takes for the privilege.

What I will not re-teach here is the conversion plumbing itself. Direct rollovers, the Pro-Rata Rule, Form 8606, and the difference between the conversion clock and the earnings clock are all covered in the 401k to Roth rollover guide. The one piece I will repeat: if any of your traditional IRAs hold after-tax basis from old non-deductible contributions, the Pro-Rata Rule smears that basis across every conversion you make, and a ladder makes one every year. Read that section and clean up the basis before you stack a single rung.

The Clock That Runs the Ladder

Each conversion carries its own five-year clock, and the clock is more generous than it sounds. It starts on January 1 of the tax year you convert, not on the day the money moves. Convert in December 2026 and the IRS treats it as if you had converted eleven months earlier; that rung unlocks January 1, 2031, a real wait of just over four years.

This matters for sequencing. A December 2026 conversion and a January 2027 conversion sit thirty days apart on the calendar and a full year apart at the exit. If you are starting a ladder late, converting before December 31 buys a year of maturity for a month of patience.

Withdrawal ordering is the other thing to know cold, and IRS Publication 590-B is the primary source. Roth money comes out in layers: direct contributions first, always tax and penalty free; then conversions, oldest first; then earnings last. If you made regular Roth contributions during your working years, that basis is spendable on day one, which quietly shortens the bridge you have to build.

Tap a rung before its clock matures and the damage is contained but real: a 10 percent penalty on the taxable portion of that conversion, with no income tax because you already paid it. The defense is a spreadsheet with one row per rung and a date column. Mark the January 1 that frees each rung and do not touch it sooner.

Five Rungs on Paper

Here is a ladder loading $50,000 a year starting in 2026. Federal figures assume a single filer with no other ordinary income, using the 2026 standard deduction of $16,100, with bracket numbers held flat for legibility.

Notice what the table is doing: after the 2031 unlock, a $50,000 rung matures every January for as long as you kept converting five years earlier. The ladder is a conveyor belt with a five-year length. Loading it is a ten-minute task each December, and the calendar does the rest.

About that tax column: $50,000 converted minus the $16,100 standard deduction leaves $33,900 of taxable income, which fills the 10 percent bracket and part of the 12 percent bracket for roughly $3,820. That is a 7.6 percent effective rate on money you deducted at 22 or 24 percent on the way in. The spread between those two numbers is the entire reason the ladder exists.

The Five Hungry Years

The ladder's hard problem is not tax. It is groceries. Years one through five produce nothing, so the plan needs a bridge that covers spending plus the conversion tax, and the tax must come from outside the IRA or you bleed penalty on the difference.

A taxable brokerage account is the standard bridge, and spending it is gentler than it looks. Only the gain in each sale counts as income; the basis comes back untaxed. Sell $50,000 of index funds you bought for $38,000 and only $12,000 lands on the return, and if your total taxable income stays under the 0 percent capital gains line ($49,450 for a single filer in 2026), the federal rate on those gains is zero.

Other bridge material: plain cash, old Roth contribution basis, a working spouse, part-time income small enough not to wreck the bracket math. And if you have none of it, there is a different tool entirely. A 72(t) SEPP plan pulls penalty-free money out of the IRA immediately, no five-year wait, in exchange for a rigid payment schedule that runs to 59 and a half. The ladder needs a bridge; 72(t) is what you run when there is no bridge to stand on.

Sizing the Rung

Rung size is a bracket decision first. With no other income, a single filer can convert about $66,500 in 2026, the $16,100 standard deduction plus the $50,400 top of the 12 percent bracket, before any dollar gets taxed above 12 percent. A married couple filing jointly can convert roughly $133,000 on the same logic. Filling the 10 and 12 percent brackets and stopping is the default play.

Then health insurance walks in and shrinks the room. If you buy coverage on the ACA exchange, every converted dollar raises your MAGI, and MAGI sets your premium subsidy. The enhanced subsidies died at the end of 2025, which resurrected the cliff: cross 400 percent of the federal poverty level, $62,600 of MAGI for a single filer on 2026 coverage, and the entire premium tax credit vanishes, a cost that can run thousands of dollars, triggered by one careless converted dollar.

So the real sizing formula is the smaller of two ceilings: the top of your target bracket, or the subsidy cliff minus every other dollar of MAGI you will report. For many single early retirees those numbers sit uncomfortably close, $66,500 against $62,600, and the cliff wins. Size against the cliff first and the bracket second. And anchor the rung to your actual year-six spending, which means knowing your number; the FIRE number calculator exists for exactly that.

What Your State Takes

California taxes Roth conversions as ordinary income on top of the federal bill, with brackets running to 12.3 percent plus a 1 percent surcharge on income over $1 million, the famous 13.3 percent ceiling. For a converter with a salary still attached, the realistic band is 9.3 percent, the bracket that catches single filers from roughly $71,000 to $370,000. A lean-year ladderer fares far better: with no other income, a $50,000 rung climbs the state's brackets from the bottom and costs closer to $1,200, a marginal rate in the 6 percent range rather than 9.3.

Florida, Texas, and Washington tax conversions at exactly zero. No state return line, no state planning, no asterisk that matters; Washington's capital gains excise tax does not touch conversion income. For residents of the no-tax three, every figure in this article is final.

The geography play is timing conversions around a move, and federal law blesses it: 4 U.S.C. section 114 bars a state from taxing the retirement income of people who genuinely left. Establish bona fide residency in Texas first, convert second, and California collects nothing. But rungs converted while you were still a Californian stay taxed; the move only helps the rungs that come after it. The residency-audit caveats live in the rollover guide; the short version is that a U-Haul receipt is not a residency, and California's auditors know the difference.

One clean fact: your state never touches the five-year clock. The clock is federal, it travels with you, and a rung converted in San Francisco matures on the same January 1 whether you spend it in Sacramento or San Antonio.

One Ladder, Start to Finish

Meet a 45-year-old single filer who quit in December 2025 with $1 million in a traditional IRA (an old 401k, directly rolled over), $310,000 in a taxable account with a $238,000 basis, and $50,000 a year of spending. Texas resident, ACA coverage, no other income. Here is the whole campaign.

2026 through 2030, the bridge years. She converts $50,000 from the IRA each December, which costs about $3,820 in federal tax: the $50,000 minus the $16,100 standard deduction leaves $33,900 of ordinary income, filling the 10 percent bracket and part of the 12. That tax cannot come from the IRA without a penalty, so she sells $53,820 of taxable holdings each year, enough to cover both the $50,000 of spending and the $3,820 bill. The sale realizes about $12,500 of gains, which keeps her taxable income near $46,400, under the $49,450 line, so the gains themselves ride at 0 percent. But the gains still count as MAGI, so her MAGI lands at $62,500, barely $100 under the $62,600 subsidy cliff. That sliver is the actual planning work, and a single surprise dividend erases it.

January 1, 2031, the ladder lands. The 2026 rung comes free: $50,000 of spendable, tax-free principal, which covers the entire year's spending. From here the machine runs flat. She keeps converting $50,000 each December, and each conversion still owes about $3,820. That tax is the one thing the matured rung does not cover, so it comes from what is left of the taxable account: the five bridge years drew $269,100 of the original $310,000, and the remaining $41,000 is the reservoir that pays the conversion tax for the rest of the ladder. No rung ever has to stretch past the spending it was sized for.

Mid-2040, age 59 and a half. The ladder retires itself. Every dollar in every account is reachable without penalty, her Roth will never owe a required minimum distribution, and whatever stayed traditional can convert at leisure. Rungs converted after 2035 technically mature after she crosses 59 and a half, which makes them ordinary low-bracket conversions rather than ladder rungs; she makes them anyway, because cheap conversion years are cheap conversion years.

The totals: about $700,000 converted across fourteen years for roughly $53,000 of federal tax, an effective rate of 7.6 percent, with zero dollars of penalty. Pulling those same dollars out raw would have added a 10 percent penalty on every one of them, about $70,000, on top of the identical income tax. Run her in California instead and add about $1,200 of state tax per lean-year rung, roughly $17,000 over the campaign; real money, but the structure survives. Before copying any of her numbers, stress-test whether the portfolio behind them survives a 40-plus-year horizon with the safe withdrawal rate calculator.

When the Ladder Is the Wrong Tool

Still working? Skip it for now. Conversions stack on top of salary, which means 22 or 24 percent federal plus 9.3 percent in California instead of the single-digit effective rates in the table above. The ladder's entire edge is the lean year; without one, you are prepaying taxes at full price.

No bridge? The ladder cannot feed you for five years, and starving to protect a tax strategy is bad math. That is 72(t) territory, or part-time-income territory, or one-more-working-year territory.

Already in your mid-fifties? Check the Rule of 55 on your current 401k before building anything, and notice that at 54 and a half, the first rung matures at almost the same moment 59 and a half arrives on its own. The ladder is a young retiree's machine. The further you stand from 59 and a half, the harder it works.

The Sticking Points

Does moving states reset or pause the five-year clock?

No. The clock is federal, it starts January 1 of the conversion's tax year, and no state can lengthen it, shorten it, or tax you for crossing a border with seasoned rungs. State residency decides one thing only: which state, if any, taxes the conversion in the year you make it.

What actually happens if I spend a rung early?

You owe a 10 percent penalty on the taxable portion of that conversion and nothing more, because the income tax was settled at conversion. The ordering rules also work in your favor: contributions come out before conversions, and older conversions before newer ones, so a partial early withdrawal hits your most-seasoned money first.

Can I convert five years of spending at once instead of laddering?

You can, and the calendar even rewards it, since one big conversion starts one clock instead of five. The tax math punishes it: $250,000 converted in a single year blows through the 12 percent bracket into the 24 and 32 percent ranges and obliterates any ACA subsidy. The whole point of the ladder is keeping each year's income small. Lump-converting defeats it unless the balance is tiny or the year is uniquely empty.

Do Roth conversions really count against ACA subsidies?

Every converted dollar is MAGI. For 2026 coverage the subsidy cliff sits at 400 percent of the federal poverty level, $62,600 for a single filer, and crossing it by any amount forfeits the entire premium tax credit. If you are subsidized, check the rung against the cliff before you ever look at the bracket.

Ladder or 72(t)?

Ladder if you can fund five bridge years from taxable money, cash, or Roth contribution basis; it stays flexible, pausable, and resizable every single year. 72(t) if you cannot, since it pays immediately, at the cost of a rigid schedule that runs to 59 and a half and punishes any deviation. The full comparison, including the three payment methods and what busting a plan costs, is in the 72(t) article.

I converted in California and then moved to Texas. Does California refund anything?

No. Each conversion is taxed by your state of residence in the year it happens, permanently. The move helps every future rung, which is why retirees who know they are leaving convert lightly before the move and heavily after residency is bona fide.

Does a December conversion really beat a January one?

By eleven months of maturity, yes. The clock backdates to January 1 of the conversion's tax year, so conversions made in December 2026 and January 2027 sit thirty days apart on the calendar and a full year apart at the exit. Late starters should convert before New Year's Eve.

The Part Nobody Can Sell You

What the influencers package as a curriculum is four moves: clear the pre-tax IRA decks, size a rung against your bracket and your subsidy cliff, convert it every December, and write the maturity date in a spreadsheet. Everything I used to build this page sits in IRS Pub 590-B and on the Mad Fientist's blog, where the original walkthrough has been up, ungated, since before most of today's course sellers quit their jobs.

What none of them can sell you, at $500 or any price, is the five-year wait. That part you pay yourself, in patience, and you were going to live those years anyway. Start the clock.