Situation guide
Roth conversions for nurses and healthcare workers: what to know before you retire
By Secure Retirement PlannerUpdated
If you are a nurse or other hospital worker, you can convert your 403(b) money and most hospital pension payouts to a Roth in 2026. But you can't roll a 457(b) from a nonprofit hospital to an IRA or convert it at all. Your best time to convert is usually a year when your pay drops, such as when you go part-time or per diem. It is usually not your last full-time years.
Which accounts you have depends on your employer. It may be a nonprofit, a public hospital or a for-profit system. This page sorts that out for you and shows a 2026 example for a nurse who cuts back to part-time.
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The short version
- Check which kind of 457(b) you have. You can't convert a nonprofit hospital's 457(b), and it pays you on the plan's schedule.
- If you are a full-time nurse, you are often in the 12% or 22% bracket. Working physicians are often in the 32% bracket or higher. That changes when converting makes sense for you.
- Going part-time or per diem lowers your income and can open room for you to convert at 12%.
- If you leave your hospital job in or after the year you turn 55, your 403(b) withdrawals before 59½ avoid the 10% penalty. Rolling to an IRA ends that.
Which hospital retirement accounts can I convert to a Roth?
Most nonprofit hospitals offer a 403(b). Public hospitals, like county or state university systems, often offer a governmental 457(b) and sometimes a 401(a). For-profit systems usually offer a 401(k). You can convert all of these to a Roth. You can do it inside the plan if it offers in-plan Roth conversions. Or you can roll to an IRA after you leave.
The exception is the 457(b) many nonprofit hospitals offer to managers, physicians and other higher earners. The IRS calls it a non-governmental, or tax-exempt, 457(b). Your money in it still belongs to the hospital until it is paid out to you. The hospital's creditors can reach it. You can only move it to another nonprofit employer's 457(b), not to an IRA. So you can't convert it to a Roth.
| Plan | Who usually offers it | Can it be converted to a Roth? | 10% penalty before 59½ after leaving? |
|---|---|---|---|
| 403(b) | Nonprofit hospitals | Yes | No, if you leave in or after the year you turn 55 |
| Governmental 457(b) | Public and county hospitals | Yes | No, at any age |
| Non-governmental 457(b) | Nonprofit hospitals (higher earners only) | No | No 10% penalty, but payouts follow the plan's rules |
| 401(k) | For-profit hospital systems | Yes | No, if you leave in or after the year you turn 55 |
| Pension (lump sum option) | Many hospitals, often as a cash balance plan | Yes, after rolling the lump sum to an IRA | Depends on age and plan |
Plan for a nonprofit 457(b) payout
You can't convert a non-governmental 457(b), so its payouts are taxed as ordinary income when you receive them. If they land in the same years you planned to convert, they use up your bracket room. Ask your plan when and how your payouts start.
Should nurses and physicians think about Roth conversions differently?
Yes, mainly because of income. If you are a full-time nurse married to a working spouse, you may be in the 12% or 22% federal bracket. A working physician is often in the 32% bracket or higher. Your conversion is taxed at your top rate, so the same move can cost you very different amounts.
The table shows the added federal tax on a $50,000 conversion at three hypothetical income levels. It assumes a married couple filing jointly in 2026.
| Situation (hypothetical) | Taxable income before converting | Added federal tax | Top rate on the conversion |
|---|---|---|---|
| Nurse couple, both working full time | $90,000 | about $9,920 | 22% |
| Retired physician couple at 66 | $150,000 | about $11,000 | 22% |
| Physician still working | $420,000 | about $16,000 | 32% |
Is going part-time a good time to do Roth conversions?
Often, yes. You may move to part-time or per diem shifts before you fully retire. Lower pay gives you more room in the 10% and 12% brackets. And you still have a paycheck to cover your living costs.
Watch two things. First, your spouse may already collect Social Security. If so, a conversion can make more of those benefits taxable. Up to 85% of Social Security can be taxed once your income passes certain levels. That raises the real cost of your first conversion dollars. See Conversions and Social Security.
Second, health coverage. Going part-time may mean you lose hospital benefits before 65. If so, a marketplace plan's premium credit depends on your income, and conversions count. See Early retirees before 65 before you convert in that situation.
Does the new Roth catch-up rule affect nurses?
It can. Starting in 2026, the rule applies if your wages from your employer were over $150,000 in the prior year. Then any catch-up contributions you make at 50 or older must go in as Roth. For 2026, the standard catch-up is $8,000, or $11,250 if you are 60 to 63.
This mostly affects physicians, nurse anesthetists, nurse practitioners and managers. It is a contribution rule, not a conversion. But if you earn that much, you may already have Roth money before you retire.
How do hospital pensions and early retirement affect conversions?
Your hospital pension may offer a lump sum when you retire. If you roll it to an IRA, you can convert it a piece at a time in your low-income years. If you take monthly payments, that income fills your low brackets first, like any pension.
Say you leave your hospital job in or after the year you turn 55. Then you can take money from that employer's 403(b) or 401(k) before 59½ without the 10% penalty. That can pay your living costs or the conversion tax in early retirement. The rule does not carry over to an IRA, so think before you roll your whole account. For timing over several years, see How much to convert each year.
Example: a nurse who goes part-time at 60
Teresa is 60 and has worked as a hospital nurse for 30 years. In 2026 she cuts back to three shifts every two weeks and earns $38,000, keeping her benefits. Her husband Ray is 66, retired and receives $28,000 a year in Social Security. They file jointly. Teresa has $420,000 in her 403(b) and rolled a $180,000 pension lump sum to an IRA last year.
Before any conversion, about $12,800 of Ray's Social Security is taxable. Their deductions are $39,850: the $32,200 standard deduction, $1,650 because Ray is over 65, and Ray's $6,000 senior deduction. Taxable income is about $10,950.
The first $13,000 of conversion costs more than it looks. Each dollar they convert also makes about 85 cents more of Ray's Social Security taxable, until 85% of it is taxed. After that, conversions are taxed at plain 12% until taxable income reaches $100,800.
Converting $78,850 from the IRA fills the 12% bracket exactly. The added federal tax would be about $10,505, an average of about 13.3%. Their income would stay under $150,000, so Ray keeps his full senior deduction. It would also stay under $218,000, so their Medicare premiums are not affected.
If you are cutting back to part-time like Teresa, your lower-pay years may be your cheapest window to convert.
| Conversion | Taxable income after | Added federal tax | Average rate on the conversion |
|---|---|---|---|
| $13,000 | about $34,950 | about $2,603 | about 20% |
| $40,000 | $61,950 | about $5,843 | about 14.6% |
| $78,850 | $100,800 | about $10,505 | about 13.3% |
Hypothetical example using 2026 federal brackets, standard deduction and senior deduction from IRS Rev. Proc. 2025-32 and the One Big Beautiful Bill Act. Assumes no other income and no state tax. Ray's Social Security taxation uses the IRS worksheet formula. Your numbers will differ.
Common questions
Can I convert my nonprofit hospital 457(b) to a Roth?
No. You can't roll a 457(b) from a nonprofit (non-governmental) employer to an IRA or convert it. Your payouts are taxed as income when you receive them.
Can I convert my 403(b) while I'm still working at the hospital?
Only if your plan offers in-plan Roth conversions. Ask your plan provider. Otherwise, you can roll it to an IRA and convert once you leave or reach the plan's in-service withdrawal age.
Should a physician convert to Roth while still working?
Usually not at a 32% or higher rate if you have lower-income years coming. Many physicians wait for the years between retiring and Social Security or RMDs.
Does per diem income count when figuring conversion taxes?
Yes. Your per diem and part-time pay are taxable wages. Add them to your conversion and other income to find your bracket.
Can I convert my hospital pension to a Roth?
You can't convert monthly pension payments. If your plan offers a lump sum and you roll it to an IRA, you can convert that IRA money over time.
Can I use the Rule of 55 with my 403(b)?
Yes, if you leave that employer in or after the year you turn 55. It only applies to that employer's plan, not to your IRAs.
Sources
Facts on this page were last checked on November 9, 2026.
- IRS: Non-governmental 457(b) deferred compensation plans · Tax-exempt 457(b) assets stay the employer's property and are open to its creditors. Read Nov 9, 2026.
- IRS: Retirement topics, Exceptions to tax on early distributions · Age-55 separation rule and governmental 457(b) exemption. Read Nov 9, 2026.
- IRS: Retirement topics, Catch-up contributions · Roth catch-up rule for prior-year wages over $150,000 starting 2026. Read Nov 9, 2026.
- IRS: 401(k) limit increases to $24,500 for 2026 · 2026 catch-up amounts of $8,000 and $11,250 for ages 60 to 63. Read Nov 9, 2026.
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments) · 2026 brackets and standard deduction. Read Nov 9, 2026.
Who wrote this
This guide was written and fact-checked by the Secure Retirement Planner editorial team using IRS, CMS and Social Security sources listed above. We update guides when the law or yearly limits change. How we research.