Can You Transfer a 403(b) to a Roth IRA? Taxes and Five-Year Rules

You can transfer a 403(b) to a Roth IRA, and federal law treats the move as a Roth conversion.¹ Because most 403(b) contributions went in before taxes, you owe ordinary income tax on the converted amount in the year you move it. There is no annual dollar cap on the conversion and no income limit that shuts you out, which is what makes this useful for shifting retirement savings into a tax-free growth environment. The planning question is not whether you’re allowed to convert. It’s how much tax you’re willing to pay in a single year.

No Income or Dollar Ceiling on the Conversion

Direct Roth IRA contributions phase out above certain income levels and are capped at a small annual dollar amount.² Neither restriction applies to conversions. Someone earning $500,000 a year can convert an entire 403(b) balance into a Roth IRA in one year if they want to. The only real constraint is the tax bill.

When Your 403(b) Will Release the Money

Most 403(b) plans will not release funds on demand. You typically need a triggering event before the plan administrator will process a distribution:³

Reaching age 59½. Once you hit this age, the plan must allow distributions regardless of employment status.
Separation from service through resignation, termination, or retirement.
Total and permanent disability, which qualifies you at any age.⁴
In-service distributions, if the plan allows current employees to move money out. Availability varies by employer and often depends on age or tenure.

Federal rules set the floor. Your plan document can be more restrictive, so confirm the specifics with HR or the plan administrator before starting paperwork.

Direct Rollover vs. Indirect Rollover

How the money moves between accounts matters. You have two options, and one of them creates an expensive problem you can easily avoid.

Direct Rollover

In a direct rollover, your 403(b) administrator sends the funds straight to your Roth IRA custodian. You never touch the money, no taxes are withheld at transfer, and the full amount lands in the Roth IRA.⁵ You still owe income tax on the converted amount when you file, but you have until the following April to pay it. This is the method most people should use.

Indirect Rollover

In an indirect rollover, the plan sends a check to you. The administrator is required to withhold 20% for federal income taxes at that point, even if you intend to deposit every dollar into the Roth IRA.⁶ On a $100,000 distribution, you receive $80,000. To complete the full conversion, you have to come up with the missing $20,000 from other savings and deposit the full $100,000 into the Roth IRA within 60 days.⁷

If you deposit only the $80,000 you received, the IRS treats the missing $20,000 as a taxable distribution. If you’re under 59½, that $20,000 also gets a 10% early withdrawal penalty. Miss the 60-day window entirely, and the full amount becomes a taxable distribution.⁸ A direct rollover avoids all of this.

How to Execute the Transfer

Once eligibility is confirmed and you’ve chosen a direct rollover, the process is straightforward but detail-sensitive.

Open a Roth IRA at a brokerage or financial institution if you don’t already have one. You’ll need the account number, the custodian’s legal name, and their mailing address for incoming rollovers, which is sometimes different from their general address.
Request a distribution or rollover form from your 403(b) plan administrator. Some plans use proprietary forms; others accept a letter of instruction.
Select “direct rollover” on the form. This is the single most important field. If you leave it blank or check the wrong box, the administrator may default to an indirect distribution with the 20% withholding.
Specify the amount. Indicate the full balance or a partial dollar amount. Partial conversions are legal and often help manage the tax hit.
Check for spousal consent requirements. If your 403(b) is subject to qualified joint and survivor annuity rules, your spouse may need to sign a written consent before the plan releases funds.⁹
Submit the form through the plan’s portal, certified mail, or fax, per the administrator’s instructions.

The transfer typically takes two to four weeks. The 403(b) administrator liquidates your holdings and sends the proceeds to the Roth IRA custodian. Watch both accounts until the Roth IRA reflects the deposit and the 403(b) balance drops accordingly. Once the money arrives, you can reinvest it however you like.

What the Tax Bill Looks Like

Converting pre-tax 403(b) money into a Roth IRA triggers ordinary income tax on the full converted amount in the year of the conversion. The IRS adds it to your other income, and the total determines your bracket.¹⁰ Because federal brackets are progressive, the conversion fills up each bracket in turn rather than being taxed at one flat rate.¹¹

Say you earn $85,000 in salary and convert $50,000 from your 403(b) in 2026. Your taxable income before deductions rises to $135,000, pushing part of the conversion from the 22% bracket into the 24% bracket. Roughly $20,700 of the conversion falls in the 22% bracket and the remaining $29,300 in the 24% bracket, producing a federal tax bill of about $11,600 on the conversion alone. State income tax adds to that where it applies.

Two rules matter during a conversion:

No 10% early withdrawal penalty applies to a properly executed Roth conversion, even if you’re under 59½, under 26 U.S.C. § 408A(d)(3).¹⁰
Pay the tax from outside the retirement account. If you pull cash from the 403(b) itself to cover the tax bill and you’re under 59½, that withdrawn amount is a separate distribution subject to the 10% penalty. Use savings or checking instead.⁴

Mixed Pre-Tax, After-Tax, and Designated Roth Balances

Not every 403(b) dollar is pre-tax. If your plan offered a designated Roth option and you used it, those contributions already went in after tax. Rolling a designated Roth 403(b) balance into a Roth IRA is generally tax-free on the contribution portion, though earnings may be taxable if the distribution isn’t a “qualified distribution.”¹²

Some older 403(b) accounts hold after-tax contributions that aren’t designated Roth money. When your account mixes pre-tax and after-tax dollars, any distribution normally includes a proportional share of each; you can’t cherry-pick only the after-tax money. On a $100,000 balance that’s 80% pre-tax and 20% after-tax, a $50,000 distribution contains $40,000 pre-tax and $10,000 after-tax. Under IRS Notice 2014-54, though, if you take a full distribution and split it in one motion, sending the pre-tax amounts to a traditional IRA and the after-tax amounts to a Roth IRA, you can separate the two pools and shrink the taxable portion of the conversion.¹³

The Five-Year Rules That Apply After You Convert

Money that lands in a Roth IRA through a conversion doesn’t get full tax-free treatment on withdrawals right away. Two separate five-year clocks govern what you can pull out and when.

The Conversion Five-Year Rule

Each Roth conversion starts its own five-year holding period, beginning January 1 of the year of the conversion. If you withdraw converted principal before that window closes and you’re under 59½, the 10% early withdrawal penalty applies to the portion that was included in your income at conversion.¹⁰ After 59½, converted funds are freely accessible regardless of whether five years have passed.

The Contribution Five-Year Rule

A separate clock decides whether the earnings inside your Roth IRA come out tax-free. It starts on January 1 of the year you first funded any Roth IRA, through contributions, conversions, or rollovers, and it runs for five years. If you’ve had a Roth IRA since 2020 with even $100 in it, this clock is already satisfied. If this conversion opens your first Roth IRA, the countdown just started, and until it finishes and you’re at least 59½, withdrawn earnings can be taxable and penalized.

If retirement is years away and you’ve never owned a Roth IRA, opening one now with a small contribution starts the earnings clock ticking.

How a Large Conversion Affects Medicare and Social Security

A Roth conversion inflates your adjusted gross income for the year, and that can trigger costs beyond income tax.

Medicare Premium Surcharges

Medicare Part B and Part D premiums are income-adjusted. If your modified adjusted gross income exceeds certain thresholds, based on your tax return from two years earlier, you pay a monthly surcharge known as IRMAA. For 2026, the first tier begins at $109,000 for single filers and $218,000 for joint filers.¹⁴ Because IRMAA uses a two-year lookback, a large conversion in 2026 affects your Medicare premiums in 2028. Sizing a conversion to stay just below a threshold, or timing it for a low-income year, can save real money.

Social Security Taxation

Whether your Social Security benefits are taxed depends on “combined income,” which equals your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. A conversion adds directly to that figure. For single filers, 50% of benefits become taxable once combined income exceeds $25,000 and 85% above $34,000. For joint filers, the thresholds are $32,000 and $44,000. These thresholds haven’t been adjusted for inflation since 1984 and 1993, so even a modest conversion can push a retiree above them.

Spreading Conversions Across Multiple Years

Converting an entire 403(b) balance in one year almost always costs more in tax than converting the same total over several years. Every added dollar of conversion income fills up a more expensive bracket. Someone converting $200,000 at once may push income into the 32% or 35% bracket, while converting $50,000 a year over four years could keep every conversion dollar in the 22% or 24% bracket.

The right annual amount depends on your other income, your deductions, and where the next bracket boundary sits. In 2026, a single filer with $60,000 of other taxable income could convert roughly $45,700 before crossing from 22% into 24%.¹¹ Years with unusually low income, such as a gap between jobs or the stretch between early retirement and Social Security, are the strongest conversion windows because you start filling brackets from a lower base.

The tradeoff is that money left in the pre-tax 403(b) during interim years keeps growing in an account that will eventually be taxed on withdrawal. Whether the bracket savings from gradual conversions outweigh the delayed tax-free growth depends on age, expected returns, and assumptions about future tax rates. For most people in their 50s and 60s with a large 403(b), multi-year conversions are the default worth modeling.

Reporting the Conversion on Your Tax Return

Your 403(b) plan administrator issues IRS Form 1099-R early in the year after the conversion, showing the gross distribution and the taxable portion.¹⁵ You report the rollover on Form 1040, with the gross amount on line 5a and the taxable amount on line 5b.

You also file Form 8606, which tracks the taxable and nontaxable portions of amounts moved into Roth IRAs. If any part of the 403(b) was after-tax money, Form 8606 is what stops the IRS from taxing that money a second time on eventual withdrawal.¹⁶ Even if the entire conversion is taxable, the form creates the paper trail showing when converted amounts entered the Roth IRA, which is what the five-year holding periods depend on.

Skipping this reporting doesn’t erase the tax owed. It just leaves the IRS with a Form 1099-R distribution and no matching rollover on your return, which reads as unreported income and often prompts a notice. Keep the 1099-R, the completed Form 8606, and the Roth IRA custodian’s confirmation of the incoming rollover for at least seven years.

1
Internal Revenue Service. Rollover Chart
2
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Internal Revenue Service. Retirement Plans FAQs Regarding 403(b) Tax-Sheltered Annuity Plans
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
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Office of the Law Revision Counsel. 26 USC 403 – Taxation of Employee Annuities
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Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
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Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
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Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
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Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Obtain Spousal Consent
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Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
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Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
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Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
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Internal Revenue Service. Instructions for Forms 1099-R and 5498
16
Internal Revenue Service. Instructions for Form 8606