Case Study: How a Teacher Saved $1.3 Million With a Roth Conversion Strategy

When most people hear the words, “I advised my client to pay $138,000 in extra taxes,” they think I’ve lost my mind. Who would willingly give more to the IRS?

But when you look deeper, this wasn’t about paying more taxes—it was about paying taxes smarter.

Today I want to walk you through a real-world case study from my practice: a teacher with a pension, pre-tax retirement accounts, and some tough choices ahead. By using a Roth conversion strategy, she turned a big tax bill today into more than $1.3 million in savings for her and her family.

Meet the Client: A Teacher With a Pension

This client is a career teacher who spent decades in the classroom. Like many educators, she also saved diligently in a 403(b) and 457(b). On top of that, she has a pension from her state retirement system that will cover most of her income needs in retirement.

At first glance, everything looked great:

• Pension income to cover expenses

• Retirement savings in her IRA

• No immediate need to withdraw from investments

  
  

But beneath the surface was a looming problem.

The Problem With Pre-Tax Retirement Accounts

403(b)/457(b)s can be great tools while you’re working because of the upfront tax deduction. But later in life, they come with strings attached:

1. Required Minimum Distributions (RMDs): At age 72-75, you’re forced to start pulling money out, even if you don’t need it.

   
   

   

   RMD Age by Birth Year

2. Tax Burden: Those withdrawals are taxed as ordinary income, on top of pension income and Social Security.

   
   

3. Impact on Medicare: Higher income can push retirees into IRMAA surcharges, raising Medicare premiums.

   
   

4. Inheritance Rules: Under the SECURE Act 2.0, children who inherit an IRA must empty it within 10 years. That often means big tax bills for beneficiaries.

   
   

For my client, the numbers were clear: if she never touched her pre-tax accounts, it would balloon over time, creating massive RMDs and a large tax burden for both her and her kids.

The Roth Conversion Strategy

Here’s the strategy we considered: converting her money from her pre-tax retirement accounts into a Roth IRA over the next few years.

What does that mean?

• She pays income taxes on the converted amount now.

• Once inside the Roth IRA, the money grows tax-free forever.

• Roth IRAs have no RMDs during her lifetime.

• Her children would inherit a tax-free account, avoiding the 10-year tax time-bomb.

  
  

At first, writing a check to the IRS doesn’t feel great. But when we modeled the long-term impact, the numbers were striking.

The Results: $1.3 Million in Savings

By moving her money into a Roth IRA, my client set herself up for:

• No future RMD headaches: Her pension provides plenty of income, so avoiding forced withdrawals was huge.

• Tax-free retirement income: She now has the flexibility to pull from her Roth IRA in retirement without increasing taxable income.

• Generational wealth transfer: Instead of leaving her kids a heavily taxed Traditional IRA, they’ll inherit a tax-free Roth IRA!

  
  

The long-term math? Over $1.3 million in savings compared to leaving the money in her Traditional IRA untouched.

Why This Matters for Teachers

Teachers often think about retirement through the lens of their pensions. But that can create blind spots. With guaranteed pension income, adding IRA withdrawals on top often pushes retirees into higher tax brackets than expected.

Roth conversions can be one of the most effective tools to:

• Smooth out lifetime taxes

• Reduce future RMDs

• Keep Medicare premiums under control

• Pass on wealth tax-free to the next generation

  
  

And unlike some financial strategies that require complicated investments, this is simply about when you choose to pay taxes; today versus tomorrow.

Key Takeaways From This Case Study

1. Paying more taxes now can mean less overall taxes later. It’s about strategy, not avoidance.

   
   

2. Traditional IRAs can become tax traps if left untouched until RMD age.

   
   

3. Roth IRAs provide flexibility in retirement, especially for those with pensions.

   
   

4. Estate planning matters. Passing on a tax-free Roth is far better than leaving children with a taxable IRA.

   
   

5. Every situation is unique. What worked for this teacher may not be right for everyone, but it’s worth exploring.

   
   

Final Thoughts

This case study highlights what I love most about financial planning, it’s not just about investments or spreadsheets. It’s about helping real people make choices that protect their families and their futures.

For my client, paying $138,000 to the IRS wasn’t about writing a bigger check. It was about building long-term security and creating a legacy for her children.

And for many teachers and public servants, Roth conversions can be one of the most powerful ways to keep more money in your pocket (and out of Uncle Sam’s) over a lifetime.

If you’re a teacher (or anyone with a pension and pre-tax retirement savings), this is a strategy worth exploring.

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David Gourley is the Founder and lead Financial Planner at K-12 Planning, an independent financial planning firm specializing in finance for teachers. He served for eight years as a high school mathematics teacher before transitioning into the financial services industry. He started K-12 Planning in 2024, and his passion for serving as a fiduciary for teachers and a student loan planning expert runs deep, as his wife and several other family members have served as educators for years.