It is a misconception that a sizeable retirement plan, such as an IRA, 401K, or 403B, prevents one from qualifying for Medicaid. Luckily, in New York State, this is not the case. An individual may still qualify for either home care Medicaid (HCMA) or nursing home Medicaid (NHMA) regardless of the amount within their retirement account.
For the year 2025, the Medicaid financial eligibility limit is $32,396 for an individual and $43,781 for a couple. Yet, this asset threshold does not factor in the principal of one’s retirement accounts, provided that said accounts are in “payout status” and the account owner is taking the Required Minimum Distribution (RMD) or Required Maximum Distribution (RMxD) each year (whether the RMD or RMxD is used is determined by the county Department of Social Services). By placing the retirement account in payout status, the principal of the account becomes exempt for Medicaid financial eligibility purposes.
It is important to note that the applicant must not have withdrawn more than the RMD or RMxD, as applicable, because doing so causes the retirement account to lose this exempt status. For example, if an individual has approximately $500K within an IRA for which the RMD is $18K for 2025, and the IRA account owner withdraws $19K, the $500K now counts toward the $32,396. As a result, the individual will not qualify for HCMA unless either the IRA administrator allows the $19K overage to be returned and the RMD retaken in the correct amount of $18K or the IRA is liquidated with the proceeds transferred out of the IRA owner’s name.
When a retirement account is placed in pay status, the RMD / RMxD counts as income for Medicaid purposes. Medicaid effectively divides the RMD / RMxD by 12, such that the 1/12 share factors into the monthly budget for Medicaid. In addition to there being an asset threshold for Medicaid, there are monthly income limits as well ($1,820 for a single individual, and $2,453 for a couple applying for Medicaid). However, generating monthly income in excess of the Medicaid limit does not prohibit one from obtaining HCMA or NHMA.
For HCMA, if one’s monthly income exceeds the limit, the overage (less deductions for supplemental health insurance premiums) is either paid to Medicaid each month (i.e., the “spenddown”) or can be protected through the use of a pooled income trust. For NHMA, a pooled trust cannot protect the income—Medicaid will cover the cost of room and board, however, all of the Medicaid recipient’s income (less the health insurance premium deductions and a $50 personal needs allowance) is payable to the facility. This is known as the Net Available Monthly Income (or “NAMI”).
While surrounding states have different rules for Medicaid eligibility, New York is generous, particularly when it comes to the treatment of retirement accounts. By speaking with an elder law attorney well-versed in Medicaid, you can discover if Medicaid is an option for you.
