Climbing Into a Tax-Sheltered Retirement: The Benefits of a Roth Conversion Ladder

A Roth conversion ladder allows you to convert large sums of cash from a tax-deferred retirement account into a Roth account. Jason York/Shutterstock

If you’ve accumulated substantial retirement funds and you want to tap early into your nest egg tax- and penalty-free, you may benefit from a Roth conversion ladder.

But it can be a complex process. So let’s start with the basics.

What Is a Roth Conversion Ladder?

A Roth conversion ladder allows you to convert large sums of cash from a tax-deferred retirement account like a traditional individual retirement account (IRA) or a traditional 401(k) into a Roth account in increments over multiple years. By transferring money over several years, you create conversion “ladders.”