Can Medicaid Take My IRA?
By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott
With many Americans living much longer due to advances in medicine, some seniors have asked whether Medicaid can take their IRA to pay for nursing home care, should they require it at some point. The answer to that question is complicated and should be addressed by an elder-care planner. Some general information follows.
Many nursing home residents pay those costs out of their own savings. After these savings and other resources are spent, many people who stay in nursing homes for long periods eventually become eligible for Medicaid.
Medicaid provides health coverage to more than 4 million low-income seniors, nearly all of whom are also enrolled in Medicare. Medicaid is a State and Federal program that will pay most nursing home costs for people with limited income and assets. Eligibility varies by state. You should check your state's requirements to learn if you are eligible.
Obviously, your IRA is part of your savings and thus one of your assets that you could spend on your health care. If you are age 70 ½ or older, you must take a required minimum distribution (RMD) each year. This is sometimes referred to as your IRA being in “payout status.” If your IRA is in payout status, Medicaid may not treat the IRA as an asset but rather as an income stream. As an income stream, some of that RMD money would likely be used towards your health care needs and therefore would have to be given to the nursing home.
Some seniors have asked about their Roth IRAs. Because a Roth IRA owner is not required to take an RMD, it is possible that a given state might treat their Roth IRA as an asset that is available to qualify for Medicaid. In other words, if you have a large Roth IRA, you might not qualify for Medicaid.
The complicated interaction of the Medicaid rules and your IRAs varies by state. Ideally, you should be proactive and speak with an elder-care planner about how your assets should be used currently to effectively plan for your future health care needs.
- Medicaid might not take your IRA, but your IRA is likely counted for eligibility
- Roth IRAs may be treated differently than Traditional IRAs
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