Why do retirement-age adults need to plan for Medicaid?

On Behalf of | Aug 20, 2021 | Medicaid Planning

Working adults often spend much of their professional lives saving and planning for their retirement. When they finally get close to retirement age, their main priority may be verifying what benefits they have and making small changes to their households and lifestyles to soften the transition away from work.

People often focus so much on what they saved while working that they overlook another important financial consideration. The rising cost of health care support during your senior years is certainly not something that you can ignore.

While you can likely receive Medicare when you retire, there are limitations to Medicare that could leave you in a position of financial hardship. Some people find that they need Medicaid benefits as they age. If you don’t plan ahead, it may be harder than you expect to get Medicaid benefits.

Medicaid is a needs-based program

Although almost everyone over a certain age can potentially qualify for Medicare benefits, Medicaid coverage is far more selective. There are strict limits on your personal income and the assets that you can have in your own name.

With the exception of the home where you live, you can possess minimal resources or money while still qualifying for Medicaid benefits. Those who need to move into a nursing home or who require rehabilitation support after a stroke or a failed hip transplant will likely need Medicaid or will have tens of thousands of dollars in uncovered medical expenses.

Medicaid will expect that you pay for your own medical care until you have nothing in your own name. Planning ahead now means you don’t have to rush right to the edge of poverty to secure medical coverage.

How does Medicaid planning work?

Medicaid planning involves controlling your retirement income and diminishing your personal assets. Appropriately structuring retirement withdrawals can help ensure that you can qualify when you need to. Moving property into a trust or making gifts to family members now could also reduce your personal assets and improve your chances of Medicaid approval.

Even protecting your house can be an important step. Although the state won’t count your homeownership against you when you apply, Medicaid recovery can still try to take the house from your estate after you die, possibly leaving your loved ones with no assets. Medicaid looks back at years of your financial records to look for transfers to others or into a trust and will penalize you for transfers made before you apply.

The sooner you plan for Medicaid, the better your position will be if you ever need those benefits.