Guide
Three worked examples
Three households, three ladders, three different things that go wrong. Every figure below is computed by the same engine the calculator runs — none of it is illustrative.
By The Roth Ladder · Published
Written against published statutory sources. Not a CPA or financial adviser — every formula is documented so you can check it.
The useful lesson across all three is that the tax bracket is rarely what limits the conversion. In the first household the health insurance subsidy binds. In the second the cash runs out. In the third the strategy itself has largely stopped applying. All three are converting sensibly on paper.
Single, 42, on a marketplace plan
Left a tech job at 42 with $600,000 in a rollover IRA and $260,000 in taxable brokerage. Spends $45,000 a year and buys health insurance through the ACA marketplace, with $16,000 of dividends and interest from the taxable account.
What binds: the ACA subsidy cliff.
| Year | Age | Converted | Federal tax | % FPL | True rate | Unlocks |
|---|---|---|---|---|---|---|
| 2026 | 42 | $50,500 | $5,800 | 424.9% FPL ⚠ | 26.2% | Jan 1, 2031 |
| 2027 | 43 | $50,500 | $5,800 | 424.9% FPL ⚠ | 26.5% | Jan 1, 2032 |
| 2028 | 44 | $50,500 | $5,800 | 424.9% FPL ⚠ | 26.9% | Jan 1, 2033 |
| 2029 | 45 | $50,500 | $5,800 | 424.9% FPL ⚠ | 27.3% | Jan 1, 2034 |
| 2030 | 46 | $50,500 | $5,800 | 424.9% FPL ⚠ | 28.1% | Jan 1, 2035 |
| 2031 | 47 | $50,500 | $5,800 | 424.9% FPL ⚠ | 28.9% | Jan 1, 2036 |
What the numbers say
- Total converted: $863,526 across 18 years, at an average true marginal rate of 31.8%.
- Federal tax: $99,093 over the whole ladder.
- Forfeited premium tax credits: $175,230, across 17 years where income crossed the 400% FPL cliff.
- Bridge fund: runs dry in 2030, covering 4 years.
- First access: nothing is reachable penalty-free until January 1, 2031.
Why the subsidy cliff decides this one
This household is filling the 12% bracket, so the naive expectation is a 12% cost. The true rate above is higher, and the gap is the premium tax credit. Because the conversion stacks on $16,000 of dividends and interest, modified AGI rises faster than the conversion alone would suggest, and the 400% FPL line arrives earlier than the top of the bracket.
The fix is not to stop converting — it is to convert to the cliff rather than to the bracket. Switching the strategy to cap at 400% FPL in the calculator converts slightly less each year at a materially lower true rate. The subsidy cliff guide covers where that line sits for other household sizes.
Married couple, 50, thin bridge
Both retired at 50 with $1,100,000 across two Traditional IRAs and $180,000 in taxable savings. Spends $72,000 a year. Covered by a retiree health plan, so no marketplace subsidy is in play — but the taxable account is doing all the work.
What binds: the bridge fund.
| Year | Age | Converted | Federal tax | % FPL | True rate | Unlocks |
|---|---|---|---|---|---|---|
| 2026 | 50 | $235,600 | $35,932 | 1,151.8% FPL ⚠ | 15.3% | Jan 1, 2031 |
| 2027 | 51 | $235,600 | $35,932 | 1,151.8% FPL ⚠ | 15.3% | Jan 1, 2032 |
| 2028 | 52 | $235,600 | $35,932 | 1,151.8% FPL ⚠ | 15.3% | Jan 1, 2033 |
| 2029 | 53 | $235,600 | $35,932 | 1,151.8% FPL ⚠ | 15.3% | Jan 1, 2034 |
| 2030 | 54 | $235,600 | $35,932 | 1,151.8% FPL ⚠ | 15.3% | Jan 1, 2035 |
| 2031 | 55 | $36,979 | $1,278 | 212.7% FPL | −57.4% | Jan 1, 2036 |
What the numbers say
- Total converted: $1,214,979 across 6 years, at an average true marginal rate of 13.0%.
- Federal tax: $180,938 over the whole ladder.
- Bridge fund: runs dry in 2027, covering 1 years.
- First access: nothing is reachable penalty-free until January 1, 2031.
Why the cash is the problem, not the tax
Nothing is wrong with this conversion schedule as tax planning. Filling the 22% bracket on a $1,100,000 balance is a reasonable call for a couple who will face large required minimum distributions otherwise — converting at 22% now can beat 24% or more later on a balance that has grown for two decades.
The problem is that $180,000 has to cover $72,000 a year of spending and the conversion tax, for the five years before anything unlocks. Look at the bridge line above. Converting less each year — or filling the 12% bracket instead — would extend the runway at the cost of a longer ladder. That is the actual trade here, and it is a cash-flow decision wearing a tax-planning costume.
Single, 56, close to 59½
Retiring at 56 with $450,000 pre-tax and $300,000 taxable, spending $50,000 a year. Wants to know whether a ladder is still the right structure this close to 59½.
What binds: time — the penalty disappears before most rungs would season.
| Year | Age | Converted | Federal tax | % FPL | True rate | Unlocks |
|---|---|---|---|---|---|---|
| 2026 | 56 | $54,500 | $5,800 | 424.9% FPL ⚠ | 10.6% | Jan 1, 2031 |
| 2027 | 57 | $54,500 | $5,800 | 424.9% FPL ⚠ | 10.6% | Jan 1, 2032 |
| 2028 | 58 | $54,500 | $5,800 | 424.9% FPL ⚠ | 10.6% | Jan 1, 2033 |
| 2029 | 59 | $54,500 | $5,800 | 424.9% FPL ⚠ | 10.6% | Jan 1, 2034 |
What the numbers say
- Total converted: $218,000 across 4 years, at an average true marginal rate of 10.6%.
- Federal tax: $23,200 over the whole ladder.
- Bridge fund: holds, covering 9 years with a low point of $26,800.
- First access: nothing is reachable penalty-free until January 1, 2031.
Why this is not really a ladder
The five-year clock exists to get around the 10% early-withdrawal penalty. That penalty disappears at 59½ — for this household, in 2030. A conversion made in 2026 seasons in 2031, by which point direct withdrawals from the Traditional IRA would already have been penalty-free.
So the seasoning structure is doing no work. That does not make converting wrong — it changes the reason. Converting here is about shrinking the pre-tax balance before required minimum distributions begin, and about IRMAA, where the two-year lookback means conversions from age 63 raise Medicare premiums at 65. Both are real arguments. Neither needs a ladder, and neither requires a five-year bridge fund.
If the goal is spending money before 59½, the Rule of 55 is almost certainly the better instrument at this age — immediate access, no clock, no commitment.
Side by side
| Household | Converted | Federal tax | Lost subsidy | Avg true rate | Bridge |
|---|---|---|---|---|---|
| Single, 42, on a marketplace plan | $863,526 | $99,093 | $175,230 | 31.8% | Dry 2030 |
| Married couple, 50, thin bridge | $1,214,979 | $180,938 | — | 13.0% | Dry 2027 |
| Single, 56, close to 59½ | $218,000 | $23,200 | — | 10.6% | Holds |
Three households converting sensibly, three different binding constraints, and three average true rates that have little to do with the brackets they were aiming at. That is the case for modelling a ladder over its whole life rather than pricing one conversion in isolation.
These are models, not projections
Every figure assumes current law for the 2026 tax year, a constant growth rate, and no state income tax. Real returns are not constant, tax law changes, and your own return has details none of these three have. The methodology page lists every formula and every omission; the disclaimer sets out where the model stops.
Common questions
What does a Roth conversion ladder look like in practice?
A conversion each year for five or more years, each one sized to fill a chosen tax bracket without crossing an income threshold that costs more than the bracket saves. The first conversion becomes accessible in year six, and from then on one tranche matures annually. In practice the schedule is rarely uniform — the amount changes year to year as other income, capital gains, and subsidy position change.
How much should you convert each year in a Roth conversion ladder?
Enough to fill the bracket you are willing to pay, unless a lower ceiling binds first. For households on a marketplace health plan, 400% of the federal poverty level usually binds well before the top of the 12% bracket, because crossing it forfeits the entire premium tax credit. Households not on a marketplace plan can usually fill the bracket itself, and for larger balances filling the 22% bracket can beat filling the 12% if it means finishing the conversions before required minimum distributions start.
Is a Roth conversion ladder worth it at age 56?
Usually not as a ladder. The five-year clock only matters because of the 10% early-withdrawal penalty, and that penalty disappears at 59½ — so a conversion made at 56 seasons at 61, by which time you could have withdrawn the money directly with no penalty anyway. Converting after 56 can still make sense to reduce future required minimum distributions or manage Medicare IRMAA exposure, but the five-year structure is no longer doing any work.
What is the true marginal rate on a Roth conversion?
Federal tax plus any forfeited ACA premium tax credit, divided by the amount converted. For a household not on a marketplace plan it equals the federal bracket. For a household on one it can be far higher — a conversion nominally inside the 12% bracket can carry a true rate above 25% once a forfeited credit is counted, which is why the bracket alone is a misleading number.
Run your own figures · Price one year's next dollar · Bridge fund planning · The subsidy cliff