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Why Medicaid is an important concern when planning for retirement

On Behalf of | Jun 23, 2021 | Estate Planning

Planning for retirement often involves setting a little of money aside out of every paycheck. You also probably need to occasionally look at your savings and re-evaluate your retirement plan. As you get closer to retirement, long-term planning also becomes important.  

You need to start thinking about your life over the next few decades and what you will need to remain independent. Often, even if you have good retirement savings, you will feel concerned about your financial obligations after retirement.  

Especially for those with a family history of medical conditions like Alzheimer’s disease, planning for future needs is important before you fully embrace retirement. Medicaid planning should be part of long-term care planning for all but the wealthiest Americans. 

You need to prepare for Medicaid long before you need the benefits 

Unlike Medicare, which is available to everyone once they reach the age of 65, Medicaid is a need-based program. You have to show that you have both limited income and limited personal assets to qualify.  

When you apply, your finances at that time aren’t the only thing that matters. You will likely have to face intense scrutiny of all major financial transactions in the last five years. Making substantial gifts to family members or transferring property into a trust in the five years before you apply to Medicaid could mean you have a penalty assessed.  

A penalty would require that you pay for your own care for multiple months regardless of your current assets or income before Medicaid will cover any of your expenses. Simply put, unless you want to go far into debt or give up all of your personal property, you have to plan for Medicaid at least five years before you need those benefits. 

Medicare doesn’t cover enough for many older adults 

You may face that you won’t need Medicaid if you qualify for Medicare, but the programs don’t offer identical coverage. Medicare has far more restrictions, especially when it comes to rehabilitative care and long-term care needs. Medicare likely won’t pay for a long stay at an inpatient rehabilitation facility or an indefinite stay in a nursing home.  

Unless you truly have enough financial resources that you imagine you can pay for nursing home costs for the rest of your life, planning now to qualify for Medicaid will protect you in the future and ensure you leave a legacy for the people that you love.