Roth 403(b) vs traditional 403(b): the split that works when a pension already fills the lower brackets

All pre-tax, all Roth, or a split in your 403(b)

Option one, all traditional: each $10,000 deferred lowers this year's taxable salary by $10,000. At an assumed 25 percent combined federal and state rate, take-home pay drops by only $7,500. Withdrawals are fully taxable later, and RMDs start at 73, or 75 for anyone born in 1960 or later.

Option two, all Roth: a $10,000 Roth deferral costs the full $10,000 of take-home pay today. Qualified withdrawals, meaning age 59½ and five tax years since your first Roth contribution to that plan, come out tax-free, and a Roth 403(b) has no RMDs during the owner's lifetime.

Option three, a split: both sides share one limit for 2026, $24,500, plus an $8,000 catch-up at 50 or older, or $11,250 instead at ages 60 to 63. You set the split as percentages or dollars on the district's salary reduction agreement, and the vendor keeps the Roth and pre-tax money in separate subaccounts.

Traditional

Roth

Split

Beliefs about Roth money that don't survive the arithmetic

Belief: tax-free always wins. It only wins when your later rate is higher than today's. At equal rates, $10,000 pre-tax and $7,500 Roth both end at $15,000 after tax, the base row below.

Belief: income drops in retirement, so traditional wins automatically. A $48,000 pension minus the $16,100 single standard deduction for 2026 leaves $31,900 of taxable income before a single 403(b) dollar comes out.

Belief: at 56 there's too little time for Roth money to grow. Growth multiplies both sides by the same factor, so it never changes which option wins (the growth-triples row: $22,500 vs $22,500). Time matters for one thing only, the five-year clock on qualified withdrawals.

Denise's next $10,000: traditional or Roth?

Denise, hypothetical, is 56, a single middle-school science teacher with 29 years of service, $410,000 in her 403(b) and $120,000 in her 457(b). She plans to teach until 60 for a pension assumed at $48,000 per year, and her next salary dollar is taxed at an assumed 25 percent combined rate.

The fair comparison uses equal take-home cost. $10,000 pre-tax costs $7,500 of pay, so it's matched against $7,500 of Roth. Assuming 5 percent a year, for illustration, both roughly double in about 14 years: $20,000 pre-tax and $15,000 Roth.

Walk through the sensitivity table below. Taxed at 25 percent later, pre-tax nets $15,000, a tie. At 30 percent it nets $14,000, and at 20 percent it nets $16,000. The winner is whichever side faces the lower rate. A starting rate of 15 percent, say a part-time or unpaid-leave year, makes Roth $2,000 better.

Denise helps pay for her mother's assisted living, so take-home pay is tight. Maxing the full $24,500 as Roth would cost $6,125 more take-home per year than pre-tax. She keeps her base deferral pre-tax and sends only the $8,000 catch-up to Roth, costing $2,000 more take-home per year and building $32,000 of Roth contributions by 60, before growth. That Roth balance can cover a lumpy $20,000 year, like a care facility bill, without adding anything to her taxable income. A calculator can run this same math with your own salary and pension estimate.

Denise's numbers

What she decided

How does a state pension change the tax on later 403(b) withdrawals?

A pension is generally fully taxable federally, though states differ, so it uses up the standard deduction first: $16,100 single or $32,200 married filing jointly for 2026. 403(b) and 457(b) withdrawals then stack on top of the pension and are taxed at whatever bracket the pension has already reached, not at the low rates an empty return would start with. For Denise, that means her first 403(b) dollar lands above $31,900 of taxable income.

Social Security, where a teacher earns it, can be up to 85 percent taxable. Traditional withdrawals raise the income used in that test; qualified Roth withdrawals don't. Teachers in districts outside Social Security skip this layer entirely.

Medicare IRMAA looks back two years at modified adjusted gross income. For 2026 the single standard tier runs up to $109,000. Denise's $48,000 pension plus a $20,000 traditional withdrawal is $68,000, well under the tier, but RMDs at 75 on a growing pre-tax balance add forced taxable income every year after that.

Before Green State Credit Union suggests a new Roth percentage, its advisors put the retirement system's benefit estimate next to your latest Form 1040 to see which rate the first withdrawal dollar would land in. The recommendation comes from those two documents and today's brackets, not from predictions about where Congress takes tax law.

Social Security interaction

Medicare IRMAA

A five-point rate gap is worth about 5 percent of the withdrawal

The dollar difference between the two options equals the gap between your tax rate now and later, times the amount withdrawn. Five points on a $20,000 withdrawal is $1,000. If you can't tell which way the gap runs, a 50/50 split caps the loss from guessing wrong at about $500 instead of $1,000.

When does a late switch to Roth 403(b) backfire?

Deferrals count only from paychecks paid in that calendar year, and there's no April catch-up the way an IRA allows. A change made in November reaches just the last few checks, and fewer still if the district pays summer salary early.

A first Roth 403(b) contribution at 56 makes earnings qualified only after five tax years, around age 60 or 61. If Denise retired at 57 and took Roth money early, the distribution would be split pro rata between contributions and earnings, and the earnings portion would be taxable. She would still avoid the 10 percent penalty, because she would leave her district job no earlier than the calendar year of her 55th birthday.

Rolling a Roth 403(b) into a brand-new Roth IRA starts the IRA's own five-year clock; the plan years don't carry over. Opening a Roth IRA with a small contribution years earlier already starts that clock. For 2026 the Roth IRA income phase-out begins at $153,000 single and $242,000 married filing jointly, which rarely touches a teacher's salary alone but can matter with a working spouse.

Missing the calendar year

The five-year clock

Rollover order

Traditional, Roth or a split: who each one fits

Traditional fits a teacher who expects a much smaller pension, for example the reduced pension Denise would get at 57, and a clearly lower rate later, or whose take-home pay can't absorb the extra tax today.

Roth fits a teacher whose pension, plus any Social Security, will reach today's rate on its own. There's also an exception with no choice: administrators whose prior-year FICA wages from the district exceeded $150,000 must make 2026 catch-up contributions as Roth.

Exceptions flip the usual advice. A married teacher whose spouse dies files single, so the standard deduction drops from $32,200 to $16,100 while survivor pension income stays similar and the rate rises. A part-time or unpaid-leave year with low income makes Roth cheap that year, the table row above shows Roth ahead by $2,000.

A split fits most people who can't predict their later rate within five points. Sending the catch-up to Roth, the way Denise did, is the simplest version to start with.

• Smaller pension and clearly lower rate later: traditional
• Pension plus Social Security near today's rate: Roth
• FICA wages over $150,000 last year: catch-up must be Roth
• Can't predict rate within five points: 50/50 split

What you can check alone and what Green State Credit Union runs with you

You can read your pension estimate, subtract the standard deduction, and change your salary reduction agreement yourself. Projecting pension, Social Security, RMDs at 75, and a lumpy cost like a parent's care across 20 years is where an intro call with Green State Credit Union earns its time, and the fee is set out in a written agreement you sign before any work begins. Investing involves risk, and account values, including Roth balances, can fall as well as rise.