Our NY Medicaid Planning Attorneys Explain How Your Retirement Accounts Could Affect Your Medicaid Benefits
Although the federal government sets many of Medicaid’s basic rules, states are still expected to run their own programs. In New York, the state Department of Health will typically exempt retirement savings accounts from Medicaid eligibility assessments—but only if the account is in payout status and only if its recipient is receiving their required minimum distributions.
The experienced elder law and Medicaid planning attorneys at Landskind & Ricaforte Law Group, P.C. understand how your retirement accounts could affect your Medicaid eligibility. Here, we discuss Medicaid rules and how they impact different types of retirement accounts.
IRA Medicaid Rules, 401ks and 401bs, and Pensions
Your retirement savings can have a big impact on your Medicaid eligibility, and it’s important that you work with a NY elder law and Medicaid planning attorney to understand the impact. Here’s what you need to know:
Individual Retirement Accounts and Medicaid Eligibility
Your individual retirement account (IRA) will count toward your asset limit unless it is in “payout status.” If your IRA is in payout status, it means you are taking the required minimum distribution out of your account on a recurring monthly or annual basis. However, if your required minimum distribution exceeds your monthly income limit, you may have to “spend down” to retain your Medicaid eligibility.
Medicaid Eligibility and 401ks and 403bs
Your 401k or 403b is subject to many of the same provisions as an IRA. If it is in payout status, its funds will not count against your asset limit. However, your 401k or 403b income will be combined with your other sources of unearned income and could count against your income limit.
Pensions and Medicaid Eligibility
Pension funds that are in active payout status are exempt from Medicaid. However, it’s important to note that with pensions, the total amount of the pension fund will not be considered when your eligibility is being adjudicated—but your monthly pension amount could count against your monthly income limit.
Maintaining Your Medicaid Eligibility
You are still entitled to apply for Medicaid if you have an IRA, a 401k, a 403b, or an employer pension. However, if you are approved for Medicaid, you may have to work to protect your eligibility. If, for example, you expect to receive long-term care assistance, you and your family must be able to prove that the value of your assets and your monthly income falls below a certain threshold.
In 2024, these thresholds were set at:
- A monthly income of $1,732 for a single adult
- An overall asset limit of $31,175 for a single adult
- A monthly income of $2,351 for married couples if both spouses are applying for benefits, or a monthly income of $1,732 if only one spouse is applying for benefits
- An overall asset limit of $42,312 for married couples if both spouses are applying for benefits, or an overall asset limit of $31,175 for the applying spouse and $154,140 for the non-applicant spouse if only one spouse is applying for benefits
Medicaid has a five-year “lookback” period for applicants who need nursing home care, and it typically determines recipient eligibility at the beginning of each year. In other words, post-retirement income that grows could present a long-term risk of benefits being lost—potentially leaving you and your family to pay out-of-pocket for expensive benefits like assisted living or home care.
Strategies for Managing Retirement Accounts in Medicaid Planning
Few families can afford the costs of services like assisted living without help. If you’re not sure whether your retirement accounts could pose a risk to your Medicaid eligibility, you don’t have to accept uncertainty in place of solutions. Landskind & Ricaforte Law Group, P.C. could help you protect your hard-earned assets by:
- Configuring strategic spend-downs
- Anticipating obstacles before they arise
- Leveraging lifetime gifting to reduce your income and asset levels without risking your family’s inheritance
- Explaining how estate planning tools like annuities and Medicaid trusts work—and if you could benefit from having your own