Like many parts of Medicaid, how retirement accounts affect eligibility depends on where you live. The rules regarding IRAs, 401Ks and other retirement accounts and their impact on Medicaid eligibility can change depending on the state. They can also change depending on the retirement account’s payout status and the marital status of the applicant. To find out the rules in your state for your retirement accounts, keep reading or contact us.

Medicaid’s Financial Eligibility Requirements

There are two financial eligibility requirements for Medicaid – an asset limit and an income limit. In most states in 2024, the individual asset limit for Medicaid’s long-term care coverage in a nursing home or at home is $2,000 and the income limit is $2,829/month, but these limits can vary by state, type of Medicaid and marital status of the applicant.

Retirement accounts can count toward the asset limit, the income limit, both limits or they may not be counted at all. It just depends on the state where you live, the payout status of your retirement account and if you or your spouse (if you’re married) is the owner of the account. This applies to IRAs, 401(k)s, 403(b)s, Keoghs and TSAs.

Importance of Payout Status

Just to be clear, as soon as you begin withdrawing monthly payments from your retirement account it goes into payout status. Before that time, Medicaid considers retirement accounts assets, and 48 states count those pre-payout status retirement accounts toward the asset limit for eligibility. Even after a retirement account enters payout status, 40 states will still count them toward the asset limit for eligibility.

Anyone over age 72 or older is legally obligated to begin withdrawing the Required Minimum Distribution (RMD) from all employer sponsored retirement plans and traditional IRAs, which would put them into payout status. You can also put your IRA in payout status as young as age 59.5 by choosing to make regular withdrawals. Roth IRAs are not obligated to begin making RMD withdrawals at any time.

Retirement Account Impact on Eligibility by State and Payout Status:

• If you live in Kentucky, North Dakota or Washington, D.C., your retirement accounts are exempt and will NOT be counted against Medicaid’s eligibility asset limit regardless of payout status.
• If you live in California, Florida, Georgia, Idaho, Mississippi, New York, Rhode Island, South Carolina, Vermont or some Ohio counties, your retirement accounts will NOT be counted against Medicaid’s eligibility asset limit if they are in payout status.
• For residents of all other states, your retirement accounts will be counted against the Medicaid asset limit regardless of payout status.

Importance 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 assets owned by either spouse will count against Medicaid’s eligibility 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, the following exceptions apply when it comes to retirement accounts:

• In Alaska, California, Delaware, Georgia, Idaho, Indiana, Kansas, Kentucky, North Dakota, Pennsylvania, Utah, West Virginia, Wisconsin, Wyoming or Washington, D.C., retirement accounts owned by the non-applicant spouse will NOT be counted against the applicant spouse’s asset limit for Medicaid eligibility regardless of payout status.
• In Florida, Mississippi, New York, Rhode Island, South Carolina, Vermont and some Ohio counties, retirement accounts owned by the non-applicant spouse will NOT be counted against the applicant spouse’s Medicaid eligibility asset limit if they are in payout status.
• For residents of all other states, retirement accounts owned by the non-applicant spouse will be counted against the applicant spouse’s Medicaid eligibility asset limit regardless of payout status.

When the non-applicant spouse receives the monthly payouts from their retirement accounts, that money will NOT be counted against the applicant spouse’s Medicaid eligibility income limit as long as the applicant is applying for Nursing Home Medicaid or Home and Community Based Services (HCBS) Waivers. That’s because all income, regardless of source, of a non-applicant spouse is exempt from the applicant spouse’s income limit as long as they are applying for one of those two Medicaid programs. The third Medicaid program relevant to seniors, Aged, Blind and Disabled (ABD) Medicaid, counts the income of both spouses toward the income limit whether one or both spouses is applying.

How a Medicaid Planner Can Help with Retirement Accounts

Our Certified Medicaid Planners understand every part of the Medicaid application process, including how to handle your retirement accounts. They will know the asset and income limits for your specific situation, and they’ll know if your retirement account will be counted toward either one of those limits, or both. If your spouse has their own retirement account, our team will understand how it impacts your eligibility and your spouse’s.

The most time-consuming part of the Medicaid application process is usually identifying and gathering all of the proper financial paperwork you need to submit with your application. Our Certified Medicaid Planners can save you the time and headaches that usually come with those steps because they know what documents to gather to fully illustrate your retirement account’s history and how to properly present those documents along with your application.

If your retirement account puts you over either the asset limit or the income limit, our team of professionals can help you find an alternative path to eligibility. There are several strategies one can use to reduce your financial resources and qualify for Medicaid, such as spousal transfer, spending down and using trusts or annuities. To learn more about those strategies, or how your retirement accounts will specifically impact your Medicaid eligibility, connect with our team of professionals at Eldercare Resource Planning.