What a 403(b) Roth Conversion Costs
Five things decide the size of the bill: your bracket, your timing, other IRA money, Medicare, and your state. Here is each one.
A Roth conversion can be worth doing, but it comes with a tax bill, and the size of that bill is mostly in your control. This page walks the levers that move it, so you can plan the timing and the amount around your own tax picture. If you are still deciding whether to convert at all, start with the 403(b) to Roth IRA conversion guide.
Life Gateway is an insurance-licensed firm and does not give tax advice. We model the tax impact for clients before they convert, but the final call belongs with you and a qualified tax professional.
Bracket filling: convert only what fits
Converted pre-tax money counts as ordinary income the year you convert. Move a large balance all at once and part of it can spill into a higher tax bracket, which taxes those dollars at a steeper rate than the rest. That is how a conversion ends up costing more than it needed to.
Bracket filling is the fix. You convert only enough to top up your current bracket without crossing into the next one, which keeps the average rate on the converted dollars lower. Bracket thresholds change every year, so check the current IRS tax tables before you decide how much to move. The bracket is a starting point, not the whole answer, because state tax, Medicare, and income phase-outs can shift the ideal amount.
The conversion ladder: spread it over low-income years
Rather than one big conversion, you can convert smaller amounts across several years. A conversion ladder like this keeps you in lower brackets and trims the total tax over time. It works best in the years your other income dips.
Teachers get more of those years than most. A gap year between districts, a year of part-time work, or the early-retirement window before your pension, Social Security, and required minimum distributions all switch on. Any of them can leave room in a lower bracket. If you are between jobs or stepping back from the classroom, that lower-income year may be the cheapest time to convert. The gap between districts is a common one.
Retire before 65 and the ladder has real room to run: several years to convert before Medicare premiums and Social Security enter the math. Convert a measured amount each year and you manage the bracket instead of getting hit with one oversized bill.
The pro-rata rule, if you have after-tax IRA money
Some teachers have made after-tax, nondeductible contributions to a traditional IRA. If you hold both pre-tax and after-tax dollars across your traditional, SEP, and SIMPLE IRAs, the IRS will not let you convert only the after-tax slice. Every conversion is treated as a proportional mix of pre-tax and after-tax across all of those IRAs, so part of it is taxable even when you meant to move only the after-tax money. That is the pro-rata rule.
Your 403(b) sits outside this test while the money stays in the 403(b). Roll it into an IRA, though, and those dollars join the pro-rata calculation for any future IRA conversions. Keeping the 403(b) separate until you understand the tax picture can matter. For how the move itself works, see the main conversion guide.
IRMAA: how a conversion can raise Medicare premiums
Medicare sets Part B and Part D premiums from your modified adjusted gross income two years back. That surcharge has a name, the Income-Related Monthly Adjustment Amount, or IRMAA. A large conversion at age 63 or later can lift your income enough to raise your Medicare premiums two years down the line.
The Social Security Administration sets the IRMAA income thresholds and they can change each year, so check the current brackets before converting near or in retirement. Timing is the lever here. The same conversion done a year earlier might land outside the lookback window that affects your premiums, while a year later it lands inside it.
State tax and the year you move
A conversion is usually taxable at the state level too. Convert a large amount while you live in a high-tax state and you add a state bill on top of the federal one. If a move to a lower-tax or no-income-tax state is already on your calendar, it can pay to wait and convert after you establish residency there.
This matters most for teachers who relocate after retirement or during a career break. State rules vary widely, and some states do not tax retirement income at all. Confirm how both your current state and any future state treat conversion income before you lock in the timing.
Cover the tax so you avoid an underpayment penalty
A conversion adds income your regular paycheck withholding never accounted for, which can leave you short at tax time. To avoid an underpayment penalty, raise your withholding or make an estimated tax payment in the quarter you convert. The IRS safe-harbor rules set how much you need to have paid in, and a tax professional can point you at the right number for your situation.
Frequently Asked Questions
How much of my conversion is taxable?
The full amount you convert from a pre-tax 403(b) is ordinary income in the year you convert. If you hold after-tax money in a traditional IRA, the pro-rata rule can make part of the conversion tax-free. A tax professional can calculate the taxable share from your total IRA balances.
Can I convert just my 403(b) and avoid the pro-rata rule?
Yes. The pro-rata rule looks at your traditional, SEP, and SIMPLE IRAs, and a 403(b) is not aggregated with those accounts. Convert directly from the 403(b) to a Roth IRA and the rule does not apply. Roll the 403(b) into a traditional IRA first and those dollars join the pro-rata calculation for later conversions.
When is the cheapest time to do a Roth conversion?
Usually a year your other income is lower than normal. For teachers that can be a gap year between jobs, a year of part-time work, or the early-retirement window before a pension, Social Security, and required minimum distributions all begin. Spreading conversions across low-income years keeps the rate down.
Will a conversion raise my Medicare premiums?
It can. Medicare sets Part B and Part D premiums using your modified adjusted gross income from two years earlier. A large conversion at roughly age 63 or later can push your income above an IRMAA threshold and raise premiums two years on. Check the current-year IRMAA thresholds before converting near retirement.
Do I owe state tax on a Roth conversion?
In most states, yes. A conversion is generally taxable at the state level unless you live in a state with no income tax. If you plan to move to a lower-tax state, converting after you establish residency there can reduce the state bill. Rules vary, so confirm your state's treatment.
Get the tax cost modeled first
A licensed educator-retirement specialist will size the bill against your bracket, your state, and your pension, at no cost and no obligation, before you convert a dollar.
Reviewed by the Life Gateway advisory team. Last reviewed July 2026. Life Gateway is an insurance-licensed financial services firm. This guide is educational and is not individualized tax, legal, or investment advice. Tax brackets, IRMAA thresholds, and IRS rules change every year, and your situation is unique, so confirm current figures with your plan administrator and a qualified tax professional before acting. Verify any advisor at FINRA BrokerCheck.