Roth Conversion

The converted amount is added to taxable income for the year, so the cost depends on the marginal rate it lands in. The arithmetic favors conversion when the current rate is below the expected rate at withdrawal, and works against it when the reverse holds.

This makes the cost highly sensitive to timing, because marginal rates move with income. A conversion made in a year with no salary can fall in the 12% bracket where the same amount would face 24% during peak earning years. Gap years between employment and retirement are where that difference tends to appear.

The conversion ladder applies this over successive years. Each converted amount becomes penalty-free five tax years after its own conversion, so a series started early enough produces a rolling supply of accessible funds. The five-year clock runs per conversion, which is what creates the bridge period that has to be funded from elsewhere.