We’ve all heard about the marshmallow experiment that examines the benefits of delayed gratification. The Roth IRA is a study in delayed gratification. Pay taxes now – or later? And what’s the advantage if I pay now?


The benefits of a Roth IRA can be huge – tax-free earnings, no Required Minimum Distributions, tax-free withdrawals. Another less obvious benefit is how a Roth IRA can help clients keep Medicare Part B and D premiums down.


Premiums for Medicare Parts B and D are means tested, which means that wealthier people pay more. Premium surcharges are based on a taxpayer’s Modified AGI or MAGI.

Roth IRA distributions do not increase MAGI, so clients taking distributions from Roth IRAs can avoid those surcharges.


CNBC’s Tom Anderson points out that “about 2.9 million [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][about 6% of] Medicare beneficiaries —single people with incomes above $85,000 and married couples who earn more than $170,000 — pay higher premiums for Medicare Part B.” The potential 52% increase can cost your client as much as $6,000 per year. Part D costs can be as high as $4,000 per year for taxpayers with high MAGI.


Given these facts, financial advisors should present the benefits of the Roth IRA to their wealthier clients. Those clients with AGIs too high to make Roth IRA contributions in a particular year can consider a conversion from a Traditional IRA to a Roth IRA. Even if you don’t really like marshmallows, that’s a move that can make a lot of sense.




Anderson, Tom. “High Earners Face Rising Medicare Premiums.” CNBC. 1 Sep. 2015.



“The Great Marshmallow Experiment.” Jumpstart. 16 Mar. 2011. https://earlychildhoodboston.wordpress.com/2011/03/16/the-great-marshmallow-experiment/[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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