What is a Roth conversion ladder, and why do investors typically start one at least five years before needing the funds?

In a Roth conversion ladder, each individual conversion from a Traditional or rollover IRA to a Roth IRA starts its own five-year clock. The converted principal (not earnings) can be withdrawn penalty-free after those five years are up, even before age 59 and a half. Early retirees often begin conversions years in advance so they have a steady stream of accessible, tax-free funds during the gap between retirement and age 59 and a half.