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Protect Your Nest Egg from Nursing Home Costs

Protect Your Nest Egg from Nursing Home Costs

Part one of two in our Medicaid and long-term care insurance series

Growing older can be hard on your mind and body, challenging your ability to care for yourself or even a spouse. Sometimes the best and safest option is nursing home care. 4 out of 10 people aged 65 and over will need a nursing home in their lifetime. And the care isn’t cheap. Indiana’s average cost for a semi-private room is $7000 a month, and can be as much as $12,000. That’s $84,000 a year or more. With skilled nursing costs continuing to rise, your retirement nest egg could be at risk. So how can you protect your savings in the unfortunate circumstance you or your spouse need long-term care?

Long term care and your retirement funds

Here’s a common scenario: a 68-year-old retired husband and wife have a $100,000 nest egg and make a modest income from Social Security. The husband has a debilitating stroke and is admitted for long-term care. He spends 14 months in a nursing home before passing away. At $7,000 a month for the skilled nursing facility, they pay $98,000 for his care. And now the late man’s wife only has $2,000 from their savings to live out the rest of her days.

Sadly, this unfortunate situation is more common than you might think. And with long-term care costs increasing every year, there’s little relief in sight. There are ways to protect your retirement and investment accounts, especially if you qualify for Medicaid. Let’s break it down.

How does Medicaid work?

In case you’re unfamiliar, Medicaid is a government-funded program that helps people in need pay for medical expenses. Nursing home care is a significant component of Medicaid, but you need to meet specific standards to qualify (more on that below). Before we dive in, let’s define some standard terms you’ll need to know:

  • Community Spouse — spouse who is well (and living in the community)
  • Institutionalized Spouse — spouse in the nursing home, also called “applicant spouse.”
  • Resources — your assets, some are “countable” and others “non-countable” or exempt

When you or your spouse apply for Medicaid, all of your accounts are carefully looked at to determine eligibility. Some resources are “countable,” meaning they are counted toward your total assets. Others are seen as “non-countable” or exempt. (And, just something to keep in mind: Medicaid has a 5-year look-back period that could carry penalties if you’ve gifted money or transferred assets in the last 60 months.)

For married couples, all of your assets are considered jointly owned. After Medicaid tallies up your assets, that number is divided in two — one half for you, the other half for your spouse. So, if you have a $100,000 nest egg, each of you would be considered as having $50,000. Thankfully, the government doesn’t want a community spouse’s savings account to be drained completely, so they developed the Community Spouse Resource Allowance (CSRA). The CSRA says if one spouse is in a nursing home, the other spouse is entitled to keep at least $25,728 in funds.

Do you qualify for Medicaid? 

While that’s a simple question, there’s no easy answer. Medicaid eligibility can get complicated, so it’s essential to get a trusted expert to look at your unique situation. At first glance, you may think you don’t qualify, but there are spending strategies for increasing eligibility. Here’s a quick look at the critical benchmarks for qualifying:

  • Institutionalized spouse cannot own more than $2,000 in assets
  • Community spouse cannot own more than $128,640 in assets
  • Each spouse makes less than $2,349 a month in income

But, even if you don’t initially meet Medicaid eligibility, talking with an experienced elder law attorney can help you navigate the system and look at legal ways to spend, protect, or move assets to qualify. The earlier you consult with an elder law attorney, the more options you may have.

How else can you protect your savings?

For most seniors, safeguarding your retirement funds is a top priority. After all, you worked your whole life to build your savings, so your Golden Years are comfortable. Even if you don’t qualify for Medicaid, there may be other ways to protect your nest egg, including long-term care insurance.

In the next post of this series, we’ll talk about long-term-care insurance, what it is, when to get it, and how it can help preserve your retirement funds.

Disclaimer: The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.

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