How Can I Protect My IRA From Medicaid?

While you might not imagine yourself saving up for retirement only to transfer your IRA to a nursing home or the government, this situation can become a reality for retirees who don’t prepare for this possibility. Fortunately, you can protect your IRA from Medicaid and receive state assistance for long-term care by understanding your state’s Medicaid requirements. Here’s what to know and how to prepare for retirement with an IRA. You may also want to talk to a financial advisor to help you with your unique circumstance.

How IRAs / 401(k)s Impact Medicaid Eligibility

Medicaid is a federal program that’s administered at the state level. The impact your IRA or other retirement accounts may have on eligibility depends on your location. Broadly speaking, states view retirement assets in one of two ways:

Exempt (non-countable toward your Medicaid eligibility)
Non-exempt (countable toward your Medicaid eligibility)

Some states are more discerning than others in deciding whether an IRA is a countable or non-countable asset. For example, the state of New York counts IRA and 401(k) funds against eligibility unless you’re receiving required minimum distributions (RMDs) or more from the account. Kentucky, on the other hand, automatically exempts retirement accounts recognized by the IRS, including IRAs.

State Medicaid Regulations for IRAs

See the chart below for a rundown of state Medicaid regulations for IRAs:

State	Applicant’s IRA	RMD Status Required for Exemption	Applicant’s Spouse’s IRA	RMD Status Required for Exemption
Alabama	Countable	N/A	Countable	N/A
Alaska	Countable	N/A	Exempt	No
Arizona	Countable	N/A	Countable	N/A
Arkansas	Countable	N/A	Countable	N/A
California	N/A	N/A	N/A	N/A
Colorado	Countable	N/A	Countable	N/A
Connecticut	Countable	N/A	Countable	N/A
Delaware	Countable	N/A	Exempt	No
District of Columbia	Exempt	No	Exempt	No
Florida	Exempt	Yes	Exempt	Yes
Georgia	Exempt	Yes	Exempt	No
Hawaii	Countable	N/A	Countable	N/A
Idaho	Exempt	Yes	Exempt	No
Illinois	Countable	N/A	Countable	N/A
Indiana	Countable	N/A	Countable	N/A
Iowa	Countable	N/A	Countable	N/A
Kansas	Countable	N/A	Exempt	No
Kentucky	Exempt	No	Exempt	No
Louisiana	Countable	N/A	Countable	N/A
Maine	Countable	N/A	Countable	N/A
Maryland	Countable	N/A	Countable	N/A
Massachusetts	Countable	N/A	Countable	N/A
Michigan	Countable	N/A	Countable	N/A
Minnesota	Countable	N/A	Countable	N/A
Mississippi	Exempt	Yes	Exempt	Yes
Missouri	Countable	N/A	Countable	N/A
Montana	Countable	N/A	Countable	N/A
Nebraska	Countable	N/A	Countable	N/A
Nevada	Countable	N/A	Countable	N/A
New Hampshire	Countable	N/A	Countable	N/A
New Jersey	Countable	N/A	Countable	N/A
New Mexico	Countable	N/A	Countable	N/A
New York	Exempt	Yes	Exempt	Yes
North Carolina	Countable	N/A	Countable	N/A
North Dakota	Exempt	Yes	Exempt	Yes
Ohio	Exempt	Yes	Exempt	Yes
Oklahoma	Countable	N/A	Countable	N/A
Oregon	Countable	N/A	Countable	N/A
Pennsylvania	Countable	N/A	Exempt	No
Rhode Island	Exempt	Yes	Exempt	Yes
South Carolina	Exempt	Yes	Exempt	Yes
South Dakota	Countable	N/A	Countable	N/A
Tennessee	Countable	N/A	Countable	N/A
Texas	Exempt	Yes	Exempt	Yes
Utah	Countable	N/A	Countable	N/A
Vermont	Exempt	Yes	Exempt	Yes
Virginia	Countable	N/A	Countable	N/A
Washington	Countable	N/A	Countable	N/A
West Virginia	Countable	N/A	Exempt	No
Wisconsin	Countable	N/A	Exempt	No
Wyoming	Countable	N/A	Exempt	No

Source: American Council on Aging (updated January 2025)

Importance of Medicaid’s Asset Limit

Medicaid’s asset limit is important because it determines whether you qualify for coverage.

Eligibility for long-term Medicaid, which can pay for nursing home care,depends on several factors, including your marital status, household size, modified adjusted gross income (MAGI) and assets. The maximum asset limit you (or you and your spouse, if married) are allowed is determined by the state.

For example, Florida, Ohio and Texas cap the asset limit at $2,000 for individuals and $3,000 for couples. California, on the other hand, has no upper limit for assets. Other states are somewhere in-between.

If your assets exceed the limit allowed for your state, you may need to spend down some of them to qualify for Medicaid, unless another pathway is available. Seniors whose assets are above the state limit may still be eligible for Medicaid if they are:

Medically needy
Eligible to place assets in a qualified income trust (QIT)

Medically needy means your care costs greatly exceed your monthly income. A qualified income trust is a type of irrevocable trust that moves assets to the control of a trustee. Whether you qualify for either option will depend on your state of residence.

Certain assets are exempt and not counted towards Medicaid’s asset limit in most states. These exemptions typically include your primary residence, vehicles, furniture and pre-paid funeral contracts. And as mentioned, some states exempt your IRA from counting toward your Medicaid eligibility.

Factors Impacting How Retirement Plans Impact Medicaid Eligibility

Whether your state exempts your IRA isn’t the only aspect to consider. The following also influence Medicaid eligibility and IRA exemption:

1. Payout Status

Some states, including Florida, Georgia and New York, don’t count IRA distributions against when you apply for Medicaid. Any monthly payments you receive, however, do count toward your income. Other states, Arizona and Pennsylvania, won’t exempt IRAs (or 401k(s)) even if they’re in payout status.

If you’re not familiar with the latest RMD rules, here’s a quick refresher. The SECURE 2.0 Act requires retirees to take RMDs at age 73 (75 for those born in 1960 or later). This applies to traditional IRAs, 401(k)s and Roth 401(k)s. Roth IRAs don’t follow RMD rules.

Remember, receiving RMDs every month (or higher amounts, if needed) puts your IRA in payout status. Lesser amounts don’t activate this status.

2. Distribution Size

After ensuring your distribution size meets RMD standards, your payments must be under state limits. Most states cap IRA incomes at $2,901 per month in 2025 before cutting off Medicaid assistance. However, it’s best to research your state’s laws to know your limit. In any case, your distribution must fall between the RMD minimum and state-set maximum to receive Medicaid.

3. Account Type

Traditional IRAs can gain payout status through RMDs and become exempt from Medicaid eligibility determination. Since Roth IRAs don’t have RMDs or income taxes, your retirement savings could sit untouched until you need it without incurring penalties. That’s an advantage if you want to keep your tax bills low in retirement, but it generally won’t help for Medicaid. Because a Roth IRA can’t go into payout status, your state will count it against your Medicaid eligibility.

4. Accessibility

Your IRA may allow you to completely drain the funds in the account in one shot. If so, your state might count the account as an asset because of its liquidity. You’ll also have to consider the tax implications of completing a full withdrawal.

5. Marital Status

Lastly, marital status can affect eligibility. State laws for a spouse’s income run the gamut from counting it in all situations to not counting it regardless of your spouse’s income or payout status. Therefore, if you’re married, it’s best to familiarize yourself with your state’s community spouse resource allowance when you apply for Medicaid.

Can Medicaid Take an Applicant’s Spouse’s Retirement Plan?

Your state might count your spouse’s retirement plan as part of your assets. You can refer to the chart above to see which states count your spouse’s IRA toward your eligibility and whether the IRA’s payout status influences exemption.

Because state treatment of a spouse’s IRA varies across the country, you should make note of your state regulations before applying to Medicaid. You can also hire a professional certified Medicaid planner (CMP) to set up a Medicaid-friendly retirement plan. Otherwise, you could jeopardize your eligibility and your spouse’s retirement account.

Medicaid’s Five-Year Look-Back Rule and IRA Planning

When you apply for Medicaid, the state will review your financial history for the previous 60 months. This is called the five-year look-back rule. During this time, Medicaid checks for any transfers or gifts of assets you made below fair market value. The goal is to prevent people from giving away money or property to get under the asset limit.

If you move IRA funds into a trust, give money to family members (including your spouse), or buy assets to lower your countable resources within this five-year window, Medicaid can impose a penalty.Examples of ineligible transfers include:

Transferring your house to your adult child
Making a large donation to charity
Gifting money for college to a grandchild or other relative directly (instead of to the school)
Giving someone money to cover medical bills (instead of paying the hospital or provider directly)

The penalty is a waiting period during which you will not receive Medicaid benefits, even if you otherwise meet the requirements. The length of this penalty depends on the amount transferred and the average cost of long-term care in your state.

Some states allow more flexibility than others. California, for instance, has a 30-month look back period that’s currently being phased out altogether. Pennsylvania allows small gifts of $500 or less without violating the lookback period.

For IRA owners, the look-back rule affects how and when you convert, withdraw, or transfer funds. By understanding the timing rules, you can protect your retirement savings and still meet Medicaid’s asset limits. Working with a financial advisor or Medicaid planning specialist can help you create a strategy that avoids penalties while preserving as much of your IRA as possible.

How Can I Protect My IRA From Medicaid?

You have three primary options for protecting your IRA from Medicaid and qualifying for long-term care benefits. Although these strategies have costs and limitations, they can be more helpful than spending down your or your spouse’s IRA:

Medicaid Asset Protection Trust

Your first option is creating an irrevocable Medicaid asset protection trust and transferring IRA funds that exceed Medicaid’s limits. This way, your IRA’s funds will fall beneath the eligibility threshold. Beware, the funds transferred will sit in the trust permanently and these trusts are expensive to create and maintain.

Because it’s an irrevocable trust, you no longer control the assets within. Lastly, implementing the trust at least five years before applying for assistance is necessary. Otherwise, your trust will fall within Medicaid’s five-year look-back rule.

Life Estate

A life estate allows you to jointly own real estate with another person, such as your spouse and transfer sole ownership to them when you die. This asset type can exempt your house from Medicaid eligibility standards. However, like Medicaid trusts, life estates are irrevocable, meaning you transfer control of the assets to your trustee. In addition, planning ahead is necessary because of Medicaid’s five-year look-back law.

Medicaid Annuity

You can also purchase an annuity that follows your state’s Medicaid regulations to shelter your funds. Even if you suddenly need long-term care and haven’t planned for it, you can transfer some of your assets to a relative to activate Medicaid’s look-back period. Then, you can use the rest of your money to obtain a Medicaid annuity that creates sufficient income for your care costs until the penalty period expires. However, annuities can be expensive and some states limit their use.

Bottom Line

You can protect your IRA from Medicaid by converting it to an annuity, spending down assets strategically, or placing funds in a trust.

Protecting your IRA from Medicaid involves knowing your state’s regulations and planning accordingly. For example, you may need to put your IRA into payout status or reduce your monthly distributions. In addition, you could roll your IRA into a Medicaid-exempt asset. Regardless, a thorough, long-term approach is necessary. Working with a financial professional can help ensure your assets won’t go to Medicaid when you need assistance for care.

Tips for Protecting Your IRA from Medicaid

A financial advisor can help you create a plan that shelters your nest egg from Medicaid and receive maximum assistance from your state. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
A qualified income trust is another option to direct funds away from Medicaid eligibility standards. This asset is beneficial if your income is too high to qualify for Medicaid but too low to afford long-term care on your own.