Roth conversions for teachers: what to know before you retire

Yes, you have two ways. Many 403(b) and governmental 457(b) plans now offer an in-plan Roth conversion. It moves your pre-tax money to the Roth side of the same plan. The IRS has allowed this in 401(k), 403(b) and governmental 457(b) plans since 2013. But each plan decides whether to offer it, so ask your plan's provider.

The other way is to roll your money to a traditional IRA after you leave your district, then convert from the IRA. You can also roll straight to a Roth IRA, which counts as a conversion. Either way, the amount you convert is added to your taxable income for the year.

Before you roll anything, know the early withdrawal rules. They differ by plan, and rolling to an IRA changes them for you.

Your pension is taxed like a paycheck. Each year it is counted first. So it fills your standard deduction and the 10% and 12% brackets before any conversion. The bigger your pension, the less room you have left to convert at a low rate.

The table shows how much room is left below the top of the 12% bracket in 2026. It assumes you are under 65 and your only other income is the pension. If you are single, your gross income can reach $66,500 before the 22% bracket starts. That is $50,400 plus the $16,100 standard deduction. For a couple, it is $133,000 ($100,800 plus $32,200).

The Social Security Fairness Act was signed on January 5, 2025 (Public Law 118-273). It repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) for Social Security benefits payable for months after December 2023.

WEP cut the Social Security you earned from other jobs if you also had a pension from work that didn't pay into Social Security. GPO cut or wiped out spousal and survivor benefits for the same group. Teachers in states where schools don't take part in Social Security were hit hardest.

For your Roth planning, the change cuts both ways. A larger Social Security check is good news. But it also means more retirement income later. Up to 85% of your Social Security can be taxable once your other income is high enough. That can make converting in the years before you claim more attractive. See Conversions and Social Security for how that tax works.

• If you have a teacher pension and Social Security from summer or earlier jobs, your own benefit is no longer reduced by WEP.
• If you are married or widowed, you may now qualify for a spousal or survivor benefit that GPO used to block.
• Check your updated estimate in your my Social Security account before you plan conversions around it.

For many teachers, it is the stretch after your last school year and before Social Security and RMDs. RMDs are required minimum distributions, the yearly withdrawals the IRS requires. They start at 73 if you were born 1951 to 1959, and at 75 if you were born 1960 or later.

In those years, your only income may be your pension. Once Social Security and RMDs arrive, the same conversion can be taxed at a higher rate. For a fuller look at that window, see Lowering tax on your RMDs.

Medicare is your other clock. Your Medicare Part B premiums are based on your income from two years earlier. A conversion at 62 is not counted toward Medicare at all. One at 63 or later can raise your premiums at 65 or later.

Paying from your savings or a bank account is usually best. That way your full converted amount keeps growing in the Roth. Many plans can't withhold tax from an in-plan conversion. So plan on paying it yourself, with an estimated tax payment or extra withholding from your pension.

If you are under 59½ with a governmental 457(b), you have another option. You can withdraw from the 457(b) to cover living costs or the tax bill without the 10% penalty. That withdrawal is still taxable income, so count it when you size your conversion.

If you're under 59½, don't take money for the tax out of your converted Roth amount. Each conversion has its own five-year clock for the 10% penalty. See The 5-year rules.