If you’re like a lot of people, a huge chunk of your net worth is tied up in your pre-tax 401(k) or IRA. And while it’s great watching that balance grow, there’s one not-so-small problem…
What if you want to retire before 59½?
How do you access that money without paying a 10% early withdrawal penalty?
One popular strategy that’s been making the rounds on Reddit and in retirement-focused Facebook groups is the Roth Ladder Strategy.
Let’s break down what it is, how it works, and why—if I’m being real—I’ve never actually recommended it.
What Is a Roth Ladder Strategy?
The Roth ladder is a tactic where you convert money from your pre-tax retirement account (like a traditional IRA) to a Roth IRA over time—so you can eventually pull that money out tax- and penalty-free before age 59½.
Sounds good, right?
But before you jump in, you need to understand two key rules:
- Roth Contributions and Conversions Can Be Withdrawn Penalty-Free
When you put money into a Roth (either by direct contribution or by converting), that basis (what you put in) can be withdrawn without tax or penalty. But…
- The 5-Year Rule Applies to Each Conversion
Every time you convert money to a Roth, that amount has to “season” for five years before you can take it out penalty-free.
So, for example, if you convert $50K to a Roth in 2025, you can’t touch it until 2030 without triggering a penalty.
Let’s Walk Through a Real Example
Let’s say you start converting chunks of your traditional IRA to a Roth starting at age 45:
- 2025: Convert $50K
- 2026: Convert $51K
- 2027: Convert $52K
- And so on…
In 2030, that first $50K (from 2025) is finally penalty-free. The following year, the $51K becomes accessible, and so on. That’s why it’s called a “ladder”—you’re building rungs year after year, then slowly pulling money out once each rung clears the five-year mark.
Why I’ve Never Actually Recommended It
Here’s the part most people skip over on social media:
You have to pay taxes on each conversion.
So if you convert $50K and you’re in the 22% federal bracket, that’s $11,000 in taxes owed. Most people don’t want to carve that out of the $50K—they want the full amount to go into the Roth.
And that’s the issue:
To make this work right, you have to pay those taxes with outside money—typically from a taxable brokerage account. If you don’t have one, the strategy starts to break down.
Who Is a Roth Ladder Actually Good For?
In my experience, the people who can make a Roth ladder work:
- Have a decent-sized taxable brokerage account
- Are retiring way before 59½
- Can cover living expenses while the Roth conversions “cook” for five years
- Have room in lower tax brackets during their early retirement years
If that’s not you, there are usually better options.
A Better Strategy? Live Off the Brokerage Account First
What I usually recommend for clients retiring in their 40s or early 50s is this:
- Live off your taxable brokerage account between ages 45 and 59½
- Do Roth conversions gradually while in a lower tax bracket
- Let that Roth IRA grow untouched for as long as possible
This gives you a massive, tax-free piggy bank in your later retirement years—without trying to tap it early and mess with the 5-year rules.
Final Thoughts
Could a Roth ladder strategy work? Sure. But in my opinion, most people are better off getting creative with their income plan and balance sheet rather than jumping through hoops just to get at retirement money early.
At the end of the day, the best strategy is the one that fits your goals, your assets, and your timeline.
If you’re thinking about retiring early and want to make sure your tax strategy actually works in real life—not just on social media—reach out to us, we’d love to help you figure out a plan that makes sense for you.
This information is general education only and is not to be construed as specific tax, legal or investment advice.
