Medicare and Medicaid Turns 50 Today: Big Challenges Await

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President Lyndon B. Johnson signed the bill creating Medicare and Medicaid at the library of former President Harry S. Truman, who was in attendance, on July 30, 1965.

Medicare Bill 50 years

Medicare, the federal health insurance program for the elderly and disabled, has come a long way since its creation in 1965 when nearly half of all seniors were uninsured.  Now the program covers 55 million people, providing insurance to one in six Americans.  With that in mind, Medicare faces a host of challenges in the decades to come.  Here’s a look at some of them:

Financing – While Medicare spending growth has slowed in recent years – a trend that may continue into the future – 10,000 people a day are becoming eligible for Medicare as the trend-setting baby boomers age. Yet the number of workers paying taxes to help fund the program is decreasing.  That means Medicare will consume a greater share of the federal budget and beneficiaries’ share of the tab will likely climb. An abundance of proposals to curb federal expenditures on Medicare exist.  They include increasing the eligibility age, restructuring benefits and cost-sharing, raising the current payroll tax rate and asking wealthier beneficiaries to pay more for coverage.  Many Republicans have backed a “premium support” model — the government would give beneficiaries a set amount of money to purchase coverage from a number of competing plans — as a way to limit Medicare spending. Democrats say premium support would undermine traditional Medicare and shift more of the program’s financial risk to beneficiaries. They favor other reforms in the program. By at least two-to-one margins, majorities of Democrats, Republicans and independents favor keeping Medicare as it is rather than changing to a premium support program, according to a recent poll from the Kaiser Family Foundation.

Affordability — Most Medicare beneficiaries don’t have a lot of money and spend a large chunk of their finances on health care. Unlike many private health insurance plans, there is no cap on out-of-pocket expenditures in traditional Medicare, and the program does not cover services that many beneficiaries need, such as dental care and eyeglasses. (Private insurers that participate in Medicare Advantage may cover these and other items that traditional Medicare does not.) In 2013, half of all people on Medicare had incomes below $23,500 per person, and premiums for Medicare and supplemental insurance accounted for 42 percent of average total out-of-pocket spending among beneficiaries in traditional Medicare in 2010, according to an analysis from the Kaiser Family Foundation. Medicare does have some programs to help beneficiaries pay their Medicare expenses but the income limits can be as low as $1,001 per month with savings and other assets at or below $7,280 (limits are higher for couples).

Managing Chronic Disease — Illnesses such as heart disease or diabetes can ring up huge medical costs, so keeping beneficiaries with these conditions as healthy as possible helps not only the patients but also Medicare’s bottom line. An analysis from the Urban Institute finds that half of all Medicare beneficiaries will have diabetes in 2030 and a third will be afflicted with heart disease. Nearly half of the people on Medicare have four or more chronic conditions and 10 percent of the Medicare population accounts for 58 percent of spending. Reducing the rate of chronic disease by just 5 percent would save Medicare and Medicaid $5.5 billion a year by 2030 and reducing it by 25 percent would save $26.2 billion per year, the Urban Institute found. As beneficiaries age, many will want to remain in their homes and communities, requiring Medicare to identify ways to serve these beneficiaries as they face physical and cognitive impairments and meet their needs for more personal care, according to the Commonwealth Fund.

Delivery-System Reform — Medicare hopes to better manage beneficiaries’ needs by revolutionizing the way in which it pays for medical care. Federal officials have taken several steps to better coordinate and improve medical care, including implementing the health law’s requirement to reduce preventable hospital readmissions and form accountable care organizations, or ACOs, where doctors and others band together to care for patients with the promise of getting a piece of any savings.  Another federal effort uses bundled payments, where Medicare gives providers a fixed sum for each patient, which is supposed to cover not only their initial treatment but also all the follow-up care. Last year, 20 percent of traditional Medicare spending — $72 billion — went to doctors, hospitals and other providers that coordinated patient care to make it better and cheaper.  Department of Health and Human Services Secretary Sylvia M. Burwell has said that by the end of 2018 Medicare aims to have half of all traditional program payments linked to quality.

The Growth of Medicare Advantage — Enrollment in these private plans that offer alternative coverage is growing sharply. But the health law seeks to cut the rate at which the government reimburses insurers to make it closer to what it spends on beneficiaries in traditional Medicare. Nearly a third of beneficiaries are enrolled in Medicare Advantage plans.   Many of the plans provide benefits beyond what traditional Medicare covers, such as eyeglasses and dental care, as well as lower out-of-pocket costs.  But as federal payment rates decline the plans may become less generous.  Another factor to watch is concentration in the Medicare Advantage market with just a handful of insurers now accounting for more than half of enrollment.

Medicare Fraud: Cloaked as Free Services for Seniors

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A podiatrist and nail salon crew sweep through senior homes offering free pedicures while billing Medicare for diabetic foot procedures. Physicians casually sign medical necessity forms for thousands of patients to get free home health care.  

Equipment suppliers hand out free knee braces while billing Medicare for more elaborate and expensive ones.

These are just a few examples of how fraud, waste and abuse seep through America’s medical bills, ranging annually from 3 percent to 10 percent of total health care spending, or $93 billion to $310 billion, law enforcement officials say.

Many of these schemes offer consumers something that will not cost them anything, because their insurance will pay for it. Insurers, meanwhile, have to pay the claims within 30 days, which sometimes means a careful scrutiny won’t happen until the money is already out the door.

Last summer, a company advertised for a free session involving DNA testing for prescription medicines at the Carrollton Senior Center. The company said technicians would do cheek swabs and send the results to people’s physicians. It asked attendees to bring their Medicare ID cards.

Marilyn Hoss saw the center calendar item and thought it sounded just fine. She was one of about 20 seniors who showed up. But she soon began to wonder.

“There was a long table by the door. You gave them your information — your Medicare card, your driver’s license, and any ID for other insurance,” she recalled. “You signed a paper. They swabbed the inside of your mouth, and they gave out ice cream bars.”

The company’s consultant invited everyone to take a seat. He explained that Medicare was spending $136 billion a year on seniors hospitalized because they’d taken drugs that reacted badly with other medications.

Genetic testing could identify how well someone would metabolize these drugs, helping prescribers avoid those bad reactions, he said.

Hoss said the man claimed that Medicare was paying him to run these tests because they would save the federal agency money. But when Hoss showed the results to her cardiologist, he was surprised.

“Where did you get this? Do you know this doctor who signed it?” he asked.

No, she replied, she didn’t know him.

“A doctor cannot do this unless they have treated you and they have a specific reason for doing it,” her cardiologist said.

The paperwork for Hoss’ test made it through the computers that scan 4.4 million Medicare bills a day. The federal government paid the lab that did the genetic testing $1,187.48 for Hoss’ DNA analysis.

Mike Fields, the senior federal agent in Dallas for the U.S. Department of Health and Human Services’ Office of Inspector General, said he was aware of the DNA testing seminars. He said his own physician urged him to get tested.

“You do know what I do for a living, don’t you?” Fields responded.

His doctor told him one day he’d need his genetic code deciphered.

“That isn’t good enough. It doesn’t make it medically necessary,” Fields said. “That’s only going to get worse as they find more and more diseases with genetic predispositions. And I hope Medicare is on top of it.”

Often, dubious providers get paid before Medicare has a chance to sniff out a scam. “As long as all the blanks are filled out and all the boxes are checked, no human ever sees it; it goes right through. They’ll pay it,” Fields said.

Medicare’s fraud and abuse

Fields, who is scheduled to retire in July 2015, said Medicare’s fraud and abuse woes in the Dallas area are concentrated in home health care, hospice care and durable medical equipment.

A special strike force of FBI, Office of Inspector General and state investigators was placed in Dallas in 2010 because of the high amount of fraud. It has cracked open illegal schemes that billed Medicare for more than half a billion dollars (though recovering only a little over $50.4 million).

So far, the investigations have resulted in 63 indictments and 43 convictions.

A common feature running through these cases is a sense that they are “victimless” crimes. The government pays, and the patient gets something free. The victim is the taxpayer.

Volunteers trained in the basics of health care fraud, known as the Texas Senior Medicare Patrol, brief older people about the sorts of deceptive practices in use.

Neil Thomas, a former employee benefits manager in Dallas, is one of those volunteers. He spoke at the Carrollton Senior Center last year.

“The amount they charge you for Medicare premiums has to be increased when $100 billion has been taken away from Medicare by fraud,” Thomas explained. “So it’s in your interest to keep your Medicare costs lower by reporting this stuff.”

After his speech, Marilyn Hoss came up. She told him about the DNA testing. “Once I heard her explain it, I knew something was wrong,” Thomas said. “I’d never heard of this before. But I thought, they’ve just found a new crack in the wall.”

Medicare’s rules for genetic testing vary. A doctor has to determine that the test is medically necessary.

Novitas Solutions, the contractor that handles Medicare claims in Texas, spells out the rules for coverage in a 10-page overview that went into effect on December 5, 2013. Genetic tests to determine a hereditary risk of certain types of breast cancer are covered. So are tests that identify genes that can predispose someone to certain blood clots and the risk of embolisms.

For “pharmacogenomics,” the term for DNA testing for medication reactions, Novitas’ overview is not encouraging.

The overview warns “there is scant evidence of general clinical uptake of pharmacogenomic diagnostic testing to guide patient management, which continues to lack sufficient evidence of decision impact, despite emerging technical research.”

Free services

The rules are more direct for home health care. Medicare will pay only for homebound patients rehabilitating after a hospital inpatient stay.

Hospice care is available only for patients where a doctor has determined they have less than six months to live.

Medical equipment like power wheelchairs and knee braces require a physician’s order.

Yet seniors are often approached by firms offering all of these services, at no cost to them, if they’ll simply provide their Medicare cards.

“When you get down to trying to prove these things, you get to a U.S. attorney and the first thing they ask is, ‘Did they get the service?’ More than likely, they did get it,” Fields said.

“So they’ll ask, ‘Did they need it?’ We’ll say no, a doctor signed it, but it’s not according to the rules. They’ll say, ‘Well, that’s a medical determination, we don’t want to take that case.’ You can explain till you’re blue in the face that they don’t need it, because we’re out there in their homes and we’re seeing it.”

In some cases, seniors got free home health care visits under these ruses for “seven or eight years,” Fields said.

Republicans and Democrats have strengthened federal agencies investigating and prosecuting health care fraud.

In the 2008 presidential campaign, when Barack Obama and John McCain offered competing health plans for covering most of the uninsured, each candidate promised that cracking down on fraud, waste and abuse would help pay the cost.

Last year, the government says, it recovered $3.3 billion of Medicare funds. More than $27.8 billion has been returned to the Medicare trust funds since 1997.

Suspicious claims

In 2010, Congress approved $100 million in funding to give the Centers for Medicare and Medicaid Services predictive analytics software. These computer programs identify suspicious claims and patterns so the government can check them out before paying. In 2014, the software was credited with halting fraudulent payments worth $210.7 million.

A law enacted earlier this year [2015] requires Medicare to quit printing Social Security numbers on Medicare cards to curb the risk of identity theft and fraud. It also requires home health agencies to post a $50,000 surety bond before they can do business with Medicare.

If these steps are taking a bite out of health care fraud, however, it’s a small one. Fields said home health care fraud is “just out of control” in four Texas counties along the Rio Grande.

Private insurers have plenty of their own fraud problems to contend with. A Carrollton chiropractor, a local union representative and a group of co-workers were convicted last summer for stealing millions of dollars from Blue Cross Blue Shield of Texas between 2003 and 2009 through phony treatments.

Already this year, hackers broke into the claims files of the insurers Anthem, Inc., and Premera Blue Cross, compromising medical identities of more than 90 million people, including more than 50,000 employees and dependents insured with AT&T.

Law enforcement officials say medical identities sell for far more on the black market than credit card numbers. And once a person’s insurance information gets out, it can be used repeatedly to submit bogus claims.

Eva Velasquez, president and CEO of the Identity Theft Resource Center in San Diego, said the nationwide push to digitize medical records is creating new horizons for fraud.

“I don’t think they’ve figured out how to get the most money out of them,” she said. “When they do, it will explode.”

What Americans Don’t Know About Social Security

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Just 28 percent of Americans received a passing grade (60 percent or higher) when asked basic Social Security questions, a new study from MassMutual finds. Moreover, from a pool of 1,500 respondents ages 18 to 65, just one person answered all 10 true/false questions correctly.

The quiz touched on a range of topics, including the national retirement age, spousal benefits and eligibility for benefits. The high failure rate suggests: Too many Americans are lacking the knowledge and tools that will allow their retirement reality to match their retirement dreams.

“Perhaps the greatest Social Security deficit in this country is the lack of education around the retirement benefits of the program,” said Michael R. Fanning, executive vice president, U.S. Insurance Group, MassMutual. “With millions of Americans nearing retirement each year, many may be at risk of underutilizing a critical component of their retirement income stream.”

If there’s a silver lining, it’s self-awareness: Just 8 percent of those surveyed considered themselves to be very knowledgeable on the subject of Social Security.

How does your own knowledge stack up? Continue reading for the full quiz.

  1. True or False? Social Security retirement benefits are based on my earnings history, so I’ll receive the same monthly benefit amount no matter when I start collecting.

A: False. If you collect Social Security retirement benefits before reaching full retirement age, you effectively lock in a lower monthly benefit amount. If you wait to begin collecting until after you reach full retirement age, you become eligible for delayed retirement credits. These credits increase your monthly benefit amount by 8 percent each year that you delay collecting, up to a maximum of 32 percent. Once you reach age 70, no additional delayed retirement credits accrue.

Source: Social Security Administration, Retirement Planner: Benefits by Year of Birth; http://www.

  1. True or False? If my spouse dies, I will continue to receive both my own benefit and my deceased spouse’s benefit.

A: False. Social Security retirement benefits are only paid while you are alive. Assuming that you qualify, you would receive the greater of your own benefit or your spouse’s benefit, but not both.

Source: Social Security Administration, Retirement Planner: Benefits for Your Spouse; yourspouse.htm

  1. True or False? I must be a U.S. citizen to collect Social Security retirement benefits.

A: False. You do not have to be a U.S. citizen to qualify for Social Security retirement benefits. Resident aliens who pay into the Social Security system may qualify to receive retirement benefits, assuming they earn enough credits and meet additional criteria. To become part of the Social Security system, non-U.S. citizens must have lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S. and a Social Security Number.

Source: Social Security Administration, Social Security Handbook, Evidence of U.S. Citizenship, §1725; handbook.17/handbook-1725.html

  1. True or False? Under current Social Security law, full retirement age is 65.

A: False. Your full retirement age is based on the year you were born. For people born between 1943 and 1954, the full retirement age is 66. If you were born in 1960 or later, the full retirement age is 67. For anyone born between 1955 and 1959, the full retirement age increases gradually.

Source: Social Security Administration, Full Retirement Age: If You Were Born between 1943 and 1954;

  1. True or False? I can continue working while collecting my full Social Security retirement benefits — regardless of my age.

A: False. You can work and receive Social Security retirement benefits. However, if you have not reached full retirement age, your earnings will be subject to the retirement earnings test. If your income exceeds the test limit, Social Security may withhold all or a portion of your benefits. Withheld benefits are repaid over your lifetime once you reach full retirement age.

Source: Social Security Administration, Retirement Planner: Getting Benefits While Working; 2/whileworking.htm

  1. True or False? If I file for retirement benefits and have minor dependent children, they also may qualify for Social Security benefits.

A: True. When you file for Social Security retirement benefits, your children may also qualify to receive benefits based on your record. An eligible child can be your biological child, adopted child or stepchild. A dependent grandchild may also qualify. Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

Source: Social Security Administration, Retirement Planner: Benefits for Your Children; yourchildren.htm; payee/index.htm

  1. True or False? As a divorced person, I can collect Social Security retirement benefits based on my ex-spouse’s earnings history.

A: True. You may be eligible to receive retirement benefits based on your ex-spouse’s earnings record, provided that:

  • Your marriage lasted at least 10 years;
  • You are currently unmarried;
  • You are at least 62 years old; and
  • The benefit you would receive based on your personal earnings history is less than the benefit amount you would receive if you filed for benefits based on your ex-spouse’s earnings record.

If your ex-spouse has not yet applied for retirement benefits, but qualifies for them, you can collect benefits based on his or her record provided that you have been divorced for at least two years.

Source: Social Security Administration, Retirement Planner: Benefits for Your Divorced Spouse; http://

  1. True or False? Once I start collecting Social Security, my benefit payments will never change.

A: False. The Social Security Act of 1973 included a provision for cost-of-living adjustments (COLAs) to help Social Security benefits account for inflation. Each year, the Social Security Administration uses specific indexes and formulas mandated by this legislation to determine whether a COLA will apply to benefits paid in the coming year and if so, how much the increase will be. For more detailed information on how COLAs are calculated, visit the Social Security Administration website indicated below.

Source: Social Security Administration, Cost-ofLiving Adjustment; http://www.socialsecurity. gov/news/cola/

  1. True or False? Government workers may have their Social Security retirement benefits reduced.

A: True. For certain workers, Social Security imposes two “offsets” that reduce the full Social Security monthly benefits that might otherwise have been paid. The Windfall Elimination Provision (WEP) affects workers who have earned a pension from an employer (such as a government agency) that did not collect Social Security taxes and who also have worked in other jobs long enough to earn Social Security benefits. Under the WEP provision, Social Security uses a modified formula to calculate your benefit, resulting in a lower benefit than you might otherwise have received. The second offset, called the Government Pension Offset (GPO), affects a spouse’s benefit based on your earnings. The GPO can reduce spousal benefits to $0.

Source: Social Security Administration, Information for Government Employees;

  1. True or False? My spouse can qualify for Social Security retirement benefits, even if he or she has no individual earnings history.

A: True. Many spouses choose to stay at home to raise children or otherwise spend extended periods of time outside the paid workforce. This can affect a spouse’s ability to qualify for Social Security benefits. In such cases, the spouse who earns less may be eligible for a Social Security spousal benefit. A spousal benefit can be as much as 50 percent of the higher earning spouse’s full retirement age benefit. The exact percentage will depend on whether or not each spouse has reached his or her full retirement age.

Source: Social Security Administration, Retirement Planner: Benefits for Your Spouse; retire2/yourspouse.htm#a0=0

Nine Compelling Reasons to Consider a Roth IRA

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Tax-free growth potential, tax-free withdrawals, no required distributions and more. Do you want to help lower your taxes and increase your retirement savings? A Roth IRA, with its tax-free growth potential and tax-free withdrawals for you and your heirs, is one way for some investors. These are just two of the benefits of a Roth IRA. There are more that may be less well known.

“We believe that most investors should consider having a Roth IRA as part of their overall retirement plan,” says Ken Hevert, vice president of retirement products at Fidelity. “And that’s either by contributing to one or converting to one. Besides tax-free withdrawals, a Roth IRA also offers flexibility, doesn’t require distributions when you reach a certain age, and can benefit your heirs.”

Before we delve into the reasons to consider a Roth IRA, here’s an important note. Not everyone can contribute to a Roth IRA because there are IRS-imposed income limits. But you still may be able to have one by converting existing money in a traditional IRA or other retirement savings account.

Money can grow tax free; withdrawals are tax free, too.

You contribute money that has already been taxed (after-tax dollars) to a Roth IRA. There’s no tax deduction on the front end as there can be with a traditional IRA. Any growth or earnings from the investments in the account—and money you take out in retirement—is free from federal taxes (and usually state and local taxes too), with a few conditions. Withdrawals from Roth IRAs are federal income tax free and penalty free if a five-year “aging” period has been met (if a withdrawal is made after a five-year period, beginning with the first taxable year after a contribution to any Roth IRA was made), and the account owner is age 59½ or older, disabled, or deceased. There’s also a $10,000 withdrawal exception for first-time homebuyers.

Those eligible can contribute $5,500 to a Roth IRA for 2015, or $6,500 if age 50 or older, by the April 15, 2016, deadline. Contributions for 2015 can be made from January 1, 2015, until the April 15, 2016, deadline.

There are no minimum required distributions.

Roth IRAs do not impose minimum required distributions (MRDs) during the lifetime of the original owner. Traditional IRAs and, generally, 401(k), 403(b), and other employer-sponsored retirement savings plans do. If you don’t need your distributions for essential expenses, MRDs may be a nuisance. They have to be calculated each year, may result in taxable income, and if you miss taking one, there could be a big penalty as well—50% of the MRD not taken. Because a Roth IRA eliminates the need to take MRDs, it may also enable you to pass on more of your retirement savings to your heirs.

Leave tax-free money to heirs.

In many cases, a Roth IRA has legacy and estate planning benefits, but you need to consider carefully the pros and cons—which can be subtle and complex. Be sure to consult an attorney or estate planning expert before attempting to use Roth accounts as part of an estate plan.

For instance, if you’re planning to leave your retirement savings to your heirs, consider how doing so may potentially affect their taxes. MRDs from inherited traditional IRAs generate taxable income for heirs, often during their peak earning years, which could unintentionally push them into a higher marginal tax bracket. On the other hand, if your heirs’ combined federal and state income tax rates are expected to be lower than yours, depending on the situation, they may be better off inheriting a traditional IRA rather than a Roth IRA. This may sound counterintuitive, since the heir would not have to pay taxes on distributions from the Roth IRA, but you should consider the total tax cost—including income taxes paid by both parties as well as any applicable estate taxes—not just the income taxes paid by the heir. Also, note that while MRDs are required for inherited Roth IRAs, those distributions generally remain tax free.

Because Roth IRAs don’t require MRDs during your lifetime, these accounts could potentially grow larger over the years for your heirs. And because you pay the income taxes due up front, a Roth IRA conversion may also help reduce the size of your taxable estate. However, be aware that if you’re planning to leave assets to a charity rather than to your heirs, conversion to a Roth IRA has the potential to be disadvantageous. This is because in many cases IRAs can be left to a charity directly, without any tax liability to either the IRA owner or the charity. In such cases, a conversion would incur taxes that could be avoided.

Enjoy tax flexibility in retirement.

You’ve already paid the taxes on the money in a Roth IRA, so as long as you follow the rules, you get to take out your money tax free. Mixing how you take withdrawals between your traditional IRAs and 401(k)s, or other qualified accounts, and Roth IRAs may enable you to better manage your overall income tax liability in retirement. You could, for example, take withdrawals from a traditional IRA up to the top of a tax bracket, and then take any money you need above that bracket from a Roth IRA. “The opportunity for tax diversification is one reason we believe most investors should at least consider having a Roth IRA as part of their overall retirement plan,” says Hevert.

Help reduce or even avoid the new Medicare surtax.

A Roth IRA may potentially help limit your exposure to the new Medicare surtax on net investment income. This is because qualified withdrawals from a Roth IRA don’t count toward the modified adjusted gross income (MAGI) threshold that determines the surtax. MRDs from traditional (i.e., pretax) workplace retirement plans, such as a traditional 401(k) or traditional IRA, are included in MAGI and do count toward the MAGI threshold for the surtax. Depending on your income in retirement, MRDs could expose you to the Medicare surtax.

Hedge against future tax hikes.

Federal tax rates rose in 2013 for single filers with taxable income above $400,000 ($450,000 for couples). Will they rise further in the future? There’s no way to know for certain, but the top tax rate remains far below its historical highs, and if you think it might go up again, a Roth IRA may make sense.

Use your contributions at any time.

A Roth IRA enables you to take out 100% of what you have contributed at any time and for any reason, with no taxes or penalties. Only earnings in the Roth IRA are subject to restrictions on withdrawals. (As noted above, a distribution of earnings from a Roth IRA is tax free and penalty free if—and only if—the five-year aging requirement has been satisfied and at least one of the following conditions is met: you reach age 59½, become disabled, make a qualified first-time home purchase, or die.) Generally, withdrawals are considered to come from contributions first.  Distributions from earnings—which can be taxable if the conditions are not met—begin only when all contributions have been withdrawn.

If you’re older, you can continue to contribute as long as you work.

As long as you have earned compensation, whether it is a regular paycheck or 1099 income for contract work, you can contribute to a Roth IRA—no matter how old you are. There is no age requirement for contributions, as there is for a traditional IRA, where you cannot contribute if you are older than age 70½—even if you have earned income.

If you’re young, your income is likely to rise.

The younger you are, the more chance there is that your income will be higher when you retire. For instance, if you’re under age 30, it’s likely that your income and spending, even during retirement, will be significantly higher than it is now, at the beginning of your career. And the greater the difference between your income now and your income in retirement, the more advantageous a Roth account can be.

If you earn too much to contribute

In order to contribute to a Roth IRA, you must have employment compensation, and then there are income limits. As a single filer, you can make a full contribution to a Roth IRA if your income is less than $116,000 ($116,00–131,000 for a partial contribution) for 2015. If you are married filing jointly, you can make a full contribution to a Roth IRA if your income is less than $183,000 ($183,000–$193,000 for a partial contribution) for 2015.

If your income is over these limits, the only way you can take advantage of a Roth IRA’s tax-free withdrawals is by converting money from an existing retirement account, such as a traditional IRA. A caveat. Although you may be tempted to pay for the costs of a Roth IRA conversion by using proceeds from the qualified account you’re converting, doing so can reduce the potential benefits of conversion. This is doubly true if you’re not yet age 59½, because you may have to pay a 10% withdrawal penalty in addition to regular income taxes.

In conclusion

No matter what your age, because a Roth IRA may improve your tax picture, it makes sense to take the time to see if you would benefit from one, notes Hevert. The key is to discuss your situation with a tax advisor to help you fully assess your situation.