Tom’s health has declined to the point where he needs to live in a nursing home, but his wife, Nancy, is healthy and will continue to live in the couple’s home. The have modest savings and income that includes two retirement accounts, one in Tom’s name and one in Nancy’s name. They know the cost of living in a nursing home will quickly deplete their savings, so they’re hoping Tom can qualify for Medicaid. They’re also hoping they don’t have to cash out their retirement accounts so Nancy can live comfortably, but they’re not sure if they can do both.

There are ways to preserve retirement accounts for seniors who are applying for Medicaid and their spouses. These strategies can be complicated, and they can vary depending on the state, the payout status of the account, the payout amount, the marital status of the Medicaid applicant and the overall financial situation of the applicant and their spouse. Contact us to learn more about the strategies for preserving and maximizing retirement accounts or keep reading.

Medicaid Eligibility Requirements and Retirement Account Payout Status

In order to qualify for Medicaid’s long-term care coverage in nursing homes, at home or in other settings such as assisted living facilities, seniors need to meet two financial requirements – an asset limit and an income limit. These limits can vary, but they’re generally low since Medicaid is intended for people with limited financial means. In most states in 2025, the individual asset limit for Medicaid long-term care coverage is $2,000 and the individual income limit is $2,901/month. Most assets and income count toward these limits, but not all. Some are exempt, which means they are not counted.

Because Medicaid’s financial limits are low, it’s natural for seniors to think they need to use up all of their resources before they can qualify. It might be especially worrisome for couples with one spouse applying for Medicaid and one spouse remaining in the community (like Tom and Nancy in the example above), because the non-applicant spouse might be in danger of living in poverty if the couple depletes all their resources to qualify the other spouse for Medicaid.

This can be a real concern, but there are rules in place in some states that allow seniors to preserve their retirement accounts while still qualifying for Medicaid, at least in some states. Plus, there are Medicaid rules in every state that help protect non-applicant spouses (also known as “community spouses”) from living in poverty.

Payout Status
Some of these rules depend on the payout status of the retirement account. As soon as you or your loved starts withdrawing monthly monthly payments from the retirement account, it goes into “payout status.” Before that time, Medicaid considers retirement accounts to be in “pre-payout status.”

Anyone age 72 or older must withdraw the Required Minimum Distribution (RMD) from their retirement account. So, most seniors who are in need of long-term care coverage have retirement accounts in payout status.

When and How Retirement Accounts Are Preserved

The cash value of retirement accounts is typically well above $2,000. So, if retirement accounts are counted toward the asset limit most seniors who own them would not be eligible for Medicaid because they would be above the asset limit.

But in some states IRAs, 401(k)s, 403(b)s, Keoghs and TSAs are exempt from the asset limit under any circumstances. Other states consider them exempt as long as they are in payout status. However, it’s important to note that the monthly payouts from retirement accounts in these states will count towards the income limit.

A third group of states, 37 of them as of Jan. 1, 2025, count retirement accounts toward the asset limit regardless of their payout status.

Impact of Marital Status

In general, assets belonging to either spouse in a married couple are considered by Medicaid to be jointly owned. This means that all assets will count against Medicaid’s asset limit for either spouse, even if only one of them is applying. For example, a savings account in the name of a non-applicant spouse will count against the asset limit of the applicant spouse.

However, there are exceptions when it comes to retirement accounts. And it’s these exceptions that can also help you or your loved one make the most of your retirement accounts.

In some states, a retirement account for a non-applicant spouse will NOT be counted against the applicant’s asset limit regardless of payout status. This means the retirement accounts of non-applicant spouses are fully preserved. Other states require a non-applicant spouse’s retirement account to be in payout status to be exempt from the asset limit of the applicant spouse. So, if a non-applicant spouse is under the age of 72 and has not withdrawn anything from their retirement account, they can preserve that account by starting to make withdrawals to put it into payout status and make it exempt from the asset limit before their applicant spouse applies for Medicaid.

To find out how your state treats retirement accounts in terms of being an asset or not, connect with one of our Certified Medicaid Planners. Or consult the comparison table below.

All income of a non-applicant spouse, including income from retirement accounts, is exempt from the income limit of the applicant spouse in all states, as long as the applicant spouse is applying for either Nursing Home Medicaid or Home and Community Based Services (HCBS) Waivers. If they are applying for Aged, Blind and Disabled (ABD) Medicaid, the income of the non-applicant spouse is counted. Nursing Home Medicaid, HCBS Waivers and ABD Medicaid are the three types of Medicaid relevant to seniors.

So, when it comes to the non-applicant spouses of Nursing Home Medicaid and HCBS Waivers applicants, they are able to maximize their retirement account payouts without limit and without endangering their spouse’s Medicaid eligibility.

These non-applicant spouse retirement accounts may still count toward the applicant spouse’s asset limit depending on the state, but there is a country-wide Medicaid provision that allows the non-applicant spouse to keep assets well above the limit without them counting toward the applicant spouse’s asset limit. This is known as the Community Spouse Resource Allowance (CSRA), which we will discuss next.

Spousal Protections

The Community Spouse Resource Allowance (CSRA) is a federal rule that protects non-applicant spouses of Nursing Home Medicaid or HCBS Waivers applicants from living in poverty. The CSRA does not apply to ABD Medicaid.

Using a CSRA, non-applicant spouses of Nursing Home Medicaid or HCBS Waivers applicants can keep up to $157,920 of the couple’s assets (as of 2025 and depending on the state and the total assets of the couple) without impacting the applicant’s Medicaid eligibility. So, even if a couple lives in a state where the non-applicant spouse’s retirement account counts toward the asset limit, the non-applicant spouse could still keep and preserve retirement accounts worth up to $157,920 (if their situation allowed them to keep that much under CSRA rules, and if they had no other assets) and their spouse would still be eligible.

The CSRA can also help married couples with just one spouse applying make the most of their retirement accounts even if that account is held by the applicant and its value would put them over the asset limit. In these cases, the applicant spouse could cash out the retirement account and then give that money their spouse, up to the allowed CSRA amount.

Like the CSRA, the Monthly Maintenance Needs Allowance (MMNA) is a Medicaid provision intended to help non-applicant spouses of Nursing Home Medicaid or HCBS Waivers applicants from living in poverty. The MMNA does not apply to ABD Medicaid applicants, which is also like the CSRA.

Using the MMNA, the applicant spouse can transfer some or all of their income to their low-income spouse who is not on Medicaid so they don’t have to live in poverty. The amount of money the applicant can transfer depends on the state where the couple lives and the income of the non-applicant spouse, who is also called the community spouse. The applicant can transfer as much as income as is needed to get the community spouse’s monthly income up to their state’s MMNA. The MMNA ranges from $2,555/month to $3,948/month, depending on the state, in 2025.

Here’s how the MMMNA can help couples maximize their retirement accounts without compromising eligibility: It gives Nursing Home Medicaid and HCBS Waivers applicants the ability to keep retirement accounts that have payouts over the income limit because they can transfer some or all of that payout amount to their spouse using the MMMNA to get below their income limit, and to provide resources for their non-applicant spouse. Without the MMMNA, the applicant might be forced to cash in a retirement account that had payouts over their income limit, but cashing out the account could put them over the asset limit.

50-State Comparison Table

The table shows how every state and Washington, D.C. treats retirement accounts that are owned by Medicaid applicants and the spouse’s of Medicaid applicants both in payout status and in pre-payout status in terms of the asset eligibility limit. The retirement accounts relevant to this discussion are IRAs, 401(k)s, 403(b)s, Keoghs and TSAs. Since California has no asset limit, so the value of retirement accounts does not matter for California Medicaid (Medi-Cal) applicants.

How a Certified Medicaid Planner Can Help Preserve Retirement Accounts

A Certified Medicaid Planner (CMP) from ElderCare Resource Planning can help seniors with retirement accounts make the most of those accounts while also qualifying for Medicaid. Our CMPs will know how your retirement accounts impact your eligibility and if they put you over either the asset or income limit. If they do put you over one or both of those limits, our CMPs can recommend the best strategies to help you get below them while still maximizing the resources you’ve already invested in those retirement accounts.

Our CMPs can let you know if you or your non-applicant spouse should put the retirement account into payout status or not. They can tell you if the non-applicant spouse might qualify for the Community Spouse Resource Allowance, and exactly how much that allowance will be in your situation. They can also tell you if the Monthly Maintenance Needs Allowance might work for you. If it does, they can calculate the exact amount that allowance should be and then make sure the state comes up with the same calculations. If there are discrepancies, our CMPs know how to appeal.

Seniors with retirement accounts will need to supply official documentation that details those accounts to the state Medicaid agency, and our CMPs know exactly what those documents are, how to get them and how to submit them so they paint a clear picture. That type of documentation will be required for all of your financial holdings. If any of that paperwork is missing or it somehow misrepresents your finances, it could lead to your application being denied and a penalty period of Medicaid ineligibility. Having a CMP on your side can ensure that doesn’t happen.