Retirement Accounts

Could Your IRA, 401(k), or Pension Derail Medicaid Eligibility?

It depends—heavily. There’s no single federal rulebook here. Each state decides how retirement accounts affect long-term care Medicaid. On top of that, outcomes hinge on account type, whether it’s paying out, total income and assets, and whether you’re married.

The twist: many states will treat retirement funds as either assets or income. The upside: with smart planning, many applicants still qualify and often preserve savings for a spouse or family member.

Why Do States Treat the Same Account So Differently?

Is every IRA or 401(k) automatically counted?

No. Some states exempt these accounts entirely, some exempt them only when in payout status, and others count them no matter what. When counted as an asset, the account pushes you toward (or over) your state’s asset limit. When exempt as an asset due to payout status, the withdrawals usually count as income.

What about pensions—asset or income?

Pensions typically count as income streams (payments while you’re alive). If you take a lump sum instead, that lump becomes a countable asset.

Do Asset Limits Make or Break Eligibility?

What numbers are we talking about?

For long-term care Medicaid (nursing homes or HCBS waivers), states cap “countable” assets. In 2025, many states (e.g., Florida, Ohio, Texas) use about $2,000 for an individual and $3,000 for a couple. There are notable exceptions (e.g., higher limits in IL and NY), and California has no asset limit (effective 1/1/24).

Which assets are usually ignored?

Common exemptions include a primary residence (within equity rules), one vehicle, household goods, and prepaid burial/funeral arrangements. In some states, certain retirement accounts are also exempt—often only if they’re in payout status.

Which Details Change How Your Account Is Counted?

Does payout status really help?

Often. If your account is in payout (RMD) status, some states will treat it as an exempt asset—but the withdrawals count as income. After the SECURE and SECURE 2.0 Acts, RMDs generally begin at age 73 (rising to 75 in 2033). If the payouts push you above the income cap (commonly around $2,901/month in 2025 for LTC Medicaid), eligibility can still be an issue.

Are Roth IRAs different?

Roth IRAs have no lifetime RMD for the owner. Some states still exempt them if you enroll in regular periodic withdrawals. In states that automatically exempt IRAs, Roths typically get similar treatment.

What if you can “cash out” the account?

If you can withdraw the entire balance on demand, many states treat it like cash in the bank—i.e., a countable asset.

Do marriage rules help protect a spouse?

Usually, yes. Assets are generally considered jointly owned, but spousal impoverishment protections allow the community spouse to keep a larger share of the couple’s resources. In several states, the community spouse’s retirement account is exempt (sometimes only if in payout).

How Do People Still Qualify—and Keep Savings Intact?

Turn on payouts

Putting an IRA/401(k) into payout can convert it from a countable asset to an exempt one in some states—watch the income limit.

Cash out and “spend down” wisely

Convert countable assets into exempt ones (prepaid funerals, modest life insurance, home safety upgrades, a vehicle) or pay for care until you meet limits.

Use a Medicaid-compliant annuity

Transform the balance into an income stream that isn’t a countable asset. But remember: the income itself counts toward the monthly limit.

Warning: Missteps can trigger penalties under the Look-Back Rule. Get state-specific guidance before moving money.

Where Does Your State Land on IRAs and 401(k)s?

(Applicant vs. Spouse • Countable vs. Exempt • Payout Required?)

Bottom Line: Can You Qualify and Still Protect Retirement Savings?

With the right plan—often, yes.

Between payout strategies, targeted spend-down, and compliant annuities, many families secure coverage without sacrificing everything. Because rules are state-specific and the Look-Back Rule is unforgiving, consider professional help before you move a dollar.