Roth conversion ladder (bracket management)

A Roth conversion is a taxable transfer from a traditional IRA or 401(k) to a Roth IRA. You pay ordinary income tax on the conversion amount in the year of conversion; all future growth and qualified withdrawals are tax-free. Unlike an original contribution, there is no income limit on conversions.

A **Roth conversion ladder** is a multi-year strategy: convert a controlled amount each year to fill specific tax brackets without spilling into the next one. Target brackets: (a) "gap years" between retirement and age 73 Required Minimum Distributions (RMDs) when earned income is low; (b) down-market years, when the same dollar of Roth represents more shares; (c) pre-Medicare years when Income-Related Monthly Adjustment Amount (IRMAA) surcharges don't yet apply.

Why this matters more post-2019: the Setting Every Community Up for Retirement Enhancement Act (SECURE Act, 2019) killed the stretch IRA. Most non-spouse beneficiaries must now empty an inherited IRA within **10 years** of the original owner's death. July 2024 final regulations additionally require annual RMDs in years 1-9 if the original owner died after their Required Beginning Date. Roth distributions are still tax-free even under the 10-year rule — so a Roth-heavy estate passes more wealth to heirs than a traditional-heavy estate at the same balance.

**Backdoor Roth**: a workaround for high earners above the direct-Roth Modified Adjusted Gross Income (MAGI) phase-out ($165,000 single / $246,000 joint for 2025). Make a non-deductible traditional IRA contribution, then immediately convert it. The pro-rata rule (IRC § 408(d)(2)) complicates this if you have other pre-tax IRA money — plan carefully.

**Mega-backdoor Roth**: after-tax 401(k) contributions up to the IRC § 415(c) overall limit ($70,000 for 2025) converted in-plan to Roth. Available only if your plan document permits both after-tax contributions and in-service conversions.

**Critical Virginia-specific warning**: A Roth conversion raises Virginia Adjusted Gross Income (VA AGI), which phases out the $12,000 VA age deduction (Va. Code § 58.1-322.03(13)) dollar-for-dollar above $50,000 single / $75,000 joint. A large single-year conversion for a Virginian 65+ can eliminate the age deduction entirely. **Laddering — smaller conversions over multiple years — usually beats one big conversion for Virginia retirees.**

**Coordinate with IRMAA**: MAGI from two years prior drives your Medicare Part B and Part D IRMAA surcharges. A 2026 conversion sets your 2028 Medicare premiums. Model this before converting.

Tagged 🟡 — execution is DIY at the custodian, but multi-year bracket and IRMAA modeling is where users make expensive mistakes. Consider a CPA or fee-only planner for the first ladder, then execute DIY thereafter.