Can I Qualify for Medicaid in New York if I Have an IRA or 401(k)?

By Albert Goodwin, Esq., New York estate and Medicaid planning attorney, Law Offices of Albert Goodwin. Figures updated for 2025. Last reviewed January 2025.

Yes, you can qualify for New York Medicaid while you own an IRA, 401(k) or similar retirement account. The account will not be counted against the asset limit if it is in payout status as New York defines that term. If it is not, the full balance counts and will usually put you over the limit. This page explains the New York rule, how it differs between home care and nursing home Medicaid, how it applies to Roth and inherited IRAs, and the New York-specific tools that let people with retirement savings and excess income still qualify.

New York Medicaid Income and Asset Limits (2024 and 2025)

New York updates these figures every January. The 2025 figures below come from the Department of Health's annual General Information System (GIS) release on Medicaid levels.

A retirement account in payout status does not count toward the resource line. Its distributions count toward the income line. That single distinction drives everything else on this page.

The New York Payout Rule: Periodic Payments Based on Life Expectancy

Many websites say an IRA is exempt if it is "distributing funds." That is not the New York standard. Under 18 NYCRR 360-4.6 and the Department of Health directive GIS 98 MA/024 ("Treatment of Retirement Funds"), a retirement fund is excluded as a resource only when the owner is receiving periodic payments of principal and interest from it. The Medicaid Reference Guide instructs local districts to measure those payments against the owner's life expectancy. Taking an occasional withdrawal does not qualify. Taking $100 a month from a $300,000 IRA does not qualify either.

In practice the local district (in New York City, the Human Resources Administration) will ask for a letter or statement from the plan custodian showing that regular distributions have been set up and showing the amount. The district then checks whether the amount is at least what a life-expectancy calculation would require. If the payments are too small, the entire balance is counted as an available resource.

Two details catch people off guard:

• The Medicaid minimum can be higher than the tax RMD. The IRS lets most owners use the Uniform Lifetime Table for required minimum distributions. Some New York districts, including NYC HRA, apply the IRS Single Life Expectancy Table, which produces a larger required payout. You need to confirm which table your district uses before you set the distribution amount.
• Age does not matter. The IRS does not require distributions until age 73, but New York Medicaid does not care about that. A 62-year-old applying for home care can elect life-expectancy-based payments and the account becomes exempt. If no payments are being taken, the account counts regardless of age.

Worked Example: A 72-Year-Old With a $300,000 IRA

Assume a single applicant, age 72, with a $300,000 traditional IRA and no other savings. If the account is not in payout status, the district counts $300,000 against the 2025 resource limit of $32,396. The applicant is ineligible by roughly $267,600.

To make the account exempt, the applicant sets up periodic distributions:

• Under the Uniform Lifetime Table, the life expectancy factor at 72 is 27.4. $300,000 divided by 27.4 is about $10,949 per year, or roughly $912 per month.
• Under the Single Life Expectancy Table, the factor at 72 is 17.2. $300,000 divided by 17.2 is about $17,442 per year, or roughly $1,453 per month.

Once distributions at or above the required figure are in place, the $300,000 balance drops out of the resource calculation. The monthly distribution is then added to Social Security and any pension as income. If the applicant also receives $1,600 in Social Security, total income with a $1,453 distribution is $3,053 per month, which is $1,253 over the 2025 single income limit of $1,800. For a home-care applicant, that excess can be handled through a pooled income trust, discussed below. For a nursing home applicant, it becomes part of the monthly contribution to the facility.

What Happens if the Account Is Not in Payout Status

An account that is not in payout status is valued at the amount the owner could withdraw, less any early-withdrawal penalty the plan would impose. Income taxes that would be owed on a withdrawal are not deducted from the countable value. If the balance plus other countable assets exceeds the limit, the applicant must spend down the excess before coverage begins.

Spending down a retirement account has a hidden cost. Every dollar withdrawn from a traditional IRA or 401(k) is taxable income in the year withdrawn. A $100,000 liquidation to spend down for Medicaid can push the owner into a higher federal and New York State bracket, and the taxes themselves are paid from money that could have been preserved. For most applicants with accounts above the limit, converting to payout status is cheaper than liquidating.

Community Medicaid vs. Nursing Home Medicaid: Different Rules for the Same IRA

New York runs two long-term care Medicaid tracks, and retirement accounts behave differently in each.

Community Medicaid (Home Care, Managed Long-Term Care, Assisted Living)

• Lookback: As of this review there is no lookback for community-based long-term care. The 2020-21 state budget amended Social Services Law §366(5)(e) to add a 30-month lookback for home care applications, but the Department of Health has repeatedly postponed implementation. Until it takes effect, transfers made before applying do not create a penalty period for home care.
• Payout income: Distributions count toward the $1,800 income limit. Income over the limit is a "spend-down" (surplus) that the applicant must either pay toward medical expenses each month or deposit into a pooled income trust.
• Planning window: Because there is currently no lookback, a home care applicant with an oversized IRA can set up payout status, deposit the surplus income into a pooled trust, and transfer other non-retirement assets without penalty.

Nursing Home (Chronic Care) Medicaid

• Lookback: 60 months under SSL §366(5)(e). Any uncompensated transfer within the five years before the application creates a penalty period calculated by dividing the transferred amount by the regional monthly nursing home rate that DOH publishes each year.
• Payout income and NAMI: The payout distribution is part of the resident's Net Available Monthly Income (NAMI). Medicaid lets the resident keep a $50 personal needs allowance, pay health insurance premiums, and send an allowance to a community spouse up to the MMMNA. Everything else, including the IRA distribution, is paid to the nursing home as the resident's share of cost. Medicaid covers the balance.
• No pooled trust option: Pooled income trusts shelter surplus income for community Medicaid only. They do not reduce the NAMI contribution in a nursing home case.
• Taking a larger distribution does not help: Some families assume taking out more than the minimum will shelter the money. In a nursing home case the extra distribution simply raises the NAMI, and if it is not spent it becomes a countable resource the following month.

Read more about the chronic care application process on our nursing home Medicaid in New York page.

How New York Treats Each Type of Retirement Account

Traditional IRA, SEP IRA, SIMPLE IRA

These follow the payout rule described above. For owners already at RMD age, the tax RMD may or may not satisfy the Medicaid minimum depending on which life expectancy table the district uses. Have the custodian compute both figures and set the higher one.

Roth IRA

A Roth IRA has no required minimum distribution during the owner's lifetime, so most Roth owners take nothing. For Medicaid purposes that means the full balance is a countable resource. To exempt a Roth, the owner must affirmatively elect periodic life-expectancy-based distributions and document the election with the custodian. The distributions are usually tax-free under federal and New York law, but Medicaid still counts them as income. Tax-free status does not mean Medicaid-free status.

Inherited IRA

An inherited IRA is available to the beneficiary and therefore countable unless in payout status. Beneficiaries who inherited after 2019 from someone other than a spouse are generally subject to the federal 10-year rule, meaning the account must be emptied within ten years of the original owner's death. A Medicaid applicant can still set up periodic payments based on the applicant's own life expectancy to meet the New York payout standard, but the 10-year deadline may force larger distributions in later years. Spouses and other eligible designated beneficiaries who can stretch distributions over their lifetime have more flexibility. Because the account was never the applicant's own contribution, some districts scrutinize inherited IRAs closely. Expect to produce the decedent's date of death and the beneficiary designation.

401(k), 403(b), 457 and Thrift Savings Plan

Employer plans are treated the same as IRAs once the participant has the right to withdraw. A participant who is still employed and whose plan prohibits in-service withdrawals may be able to argue the account is not currently available. Once the person separates from service, the account is available and the payout rule applies. Many employer plans do not offer flexible periodic payment schedules. Rolling the plan into an IRA before applying is often the only way to set up a compliant distribution.

Defined Benefit Pensions

A traditional pension that pays a fixed monthly amount and offers no lump-sum option is not a countable resource because there is no principal the owner can access. The monthly pension payment is income. If the plan offers a lump-sum election that has not yet been made, the district may treat the lump sum as available.

Annuities Held Inside an IRA

An IRA invested in an annuity that has been annuitized produces a fixed income stream, which satisfies the payout requirement. An annuity in deferral is a countable resource. For nursing home applications, an annuity purchased by the applicant or spouse must also comply with the federal Deficit Reduction Act requirements adopted in New York: it must be irrevocable, non-assignable, actuarially sound, and must name the State as remainder beneficiary to the extent of Medicaid paid. Failure to meet those terms is treated as a transfer of assets.

Retirement Accounts Owned by the Community Spouse

In a nursing home case, Medicaid takes a "snapshot" of the couple's combined countable resources as of the first day of continuous institutionalization. A community spouse's IRA or 401(k) that is not in payout status is included in that snapshot. The community spouse may keep resources up to the CSRA ($157,920 maximum in 2025). Anything above that must be spent down, transferred under a court order, or protected through spousal refusal.

If the community spouse's account is in payout status, the balance is excluded from the snapshot entirely. The distributions are the community spouse's income. Under the "name on the check" rule, the community spouse's income is not deemed available to the institutionalized spouse, so a community spouse can have income well above the MMMNA without affecting the applicant's eligibility. If the community spouse's income is below the $3,948 MMMNA, part of the institutionalized spouse's income can be allocated to bring the community spouse up to that figure, which reduces the NAMI paid to the nursing home.

For home care cases, New York applies the same spousal impoverishment protections to Managed Long-Term Care enrollees, so the CSRA and MMMNA figures above also govern a community spouse's retirement account when the ill spouse receives home care.

New York Planning Tools for Retirement Accounts and Excess Income

Pooled Income Trust

A pooled income trust is a supplemental needs trust run by a nonprofit under 42 U.S.C. §1396p(d)(4)(C) and SSL §366(2)(b)(2)(iii). A community Medicaid applicant who is disabled, including an applicant over 65 who obtains a disability determination, deposits the monthly surplus income into the trust. The deposited amount is disregarded, so the applicant meets the income limit. The trust then pays the applicant's rent, utilities and other living expenses from the account. For the 72-year-old in the example above, the $1,253 monthly surplus created by the IRA distribution would go into the pooled trust and come back out as paid bills. This is the standard way New Yorkers with payout-status IRAs qualify for home care. See our page on pooled income trusts in New York and the related discussion of supplemental needs trusts.

Spousal Refusal

Social Services Law §366(3)(a) lets a community spouse sign a written refusal to make his or her income and resources available to the applicant spouse. Medicaid must then determine the applicant's eligibility on the applicant's own income and resources alone. A community spouse with a $400,000 401(k) that is not in payout status can sign a refusal and the applicant spouse can still qualify. The trade-off: the Department has the right to pursue the refusing spouse for contribution, and New York City in particular does bring recovery claims. The amount sought is typically based on the Medicaid rate, which is far lower than the private-pay rate, and claims are frequently negotiated. Spousal refusal is a New York tool; most other states do not honor it. See spousal refusal in New York and our page on moving assets to one spouse.

Why an IRA Usually Should Not Go Into a Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust used to shelter a home, brokerage accounts and cash from the five-year lookback. Clients often ask to put the IRA in it too. Retitling an IRA into a trust is treated by the IRS as a complete distribution of the account. The entire balance becomes taxable income in that year. A $300,000 IRA transferred to a MAPT would generate roughly $300,000 of taxable income, with federal and New York tax that could exceed $100,000. For that reason IRAs are almost always left out of the trust and handled through payout status instead. The trust can be named as the IRA's death beneficiary without any lifetime tax, which protects the account for heirs after the owner dies. Read more about Medicaid Asset Protection Trusts in New York and advanced New York estate planning techniques.

Payout Status vs. Spend-Down: Choosing Between Them

Payout status is the better choice when the account is large relative to the resource limit, the owner is in a higher tax bracket, or the owner wants heirs to inherit the remaining balance. Spend-down can make sense when the account is small (say, $10,000 to $20,000 over the limit), when the money is needed anyway for a pre-paid funeral, home repairs or debt, or when the owner is in a low bracket and the tax hit is minor. In a nursing home case, remember that payout distributions flow to the facility as NAMI, so the "preservation" from payout status is of the principal, not the income.

How We Handle Retirement Accounts in a Medicaid Application

Before filing, we obtain current statements for every retirement account owned by the applicant and spouse and identify which are in payout status. For accounts that are not, we calculate the required distribution under both IRS tables and request that the custodian establish monthly payments at the correct amount, then obtain written confirmation for the district. For Roth and inherited IRAs we document the election separately because districts sometimes miss that these accounts can be in payout status. We project the resulting income, set up a pooled income trust where the case is a home care case, and evaluate spousal refusal where a community spouse's account would otherwise exceed the CSRA. When a district counts a payout-status account in error, we request a fair hearing under 18 NYCRR Part 358 and present the custodian documentation and GIS 98 MA/024.

Frequently Asked Questions

Does my spouse's 401(k) count if I apply for nursing home Medicaid in New York?

Yes, unless it is in payout status or your spouse signs a spousal refusal. A community spouse's 401(k) that is not paying out is included in the resource snapshot and counted against the CSRA. In payout status the balance is excluded and the distributions are your spouse's own income, which does not affect your eligibility.

My IRA is already paying my tax RMD. Is that enough for Medicaid?

Sometimes. If your district uses the Uniform Lifetime Table, the tax RMD generally satisfies the Medicaid minimum. If your district uses the Single Life Expectancy Table, the Medicaid minimum will be higher than your RMD and you will need to increase the distribution.

Do I have to be 73 to put my IRA in payout status?

No. Age governs the IRS requirement, not the Medicaid rule. An owner of any age can elect life-expectancy-based periodic payments. Owners under 59½ should consider whether the distributions qualify for the substantially equal periodic payment exception to the 10 percent early withdrawal penalty.

Will my IRA distributions push me over the home care income limit?

Often, yes. The solution in most cases is a pooled income trust, which lets you deposit the surplus and have it spent on your living expenses while remaining eligible.

Can I just gift the IRA to my children before applying?

You cannot gift an IRA directly. You would have to withdraw the funds, pay income tax on the entire amount, and then gift the cash. For nursing home Medicaid, the gift would also trigger a transfer penalty if made within the 60-month lookback.

Talk to a New York Medicaid Planning Attorney

The rules above change every January, and local districts apply them inconsistently. If you or a spouse own retirement accounts and expect to need home care or nursing home care, the Law Offices of Albert Goodwin can review the accounts, calculate the required payout, and prepare the application. Our office is in Midtown Manhattan and we handle Medicaid matters throughout New York City, Long Island and Westchester. Call 212-233-1233 or email [email protected] to schedule a consultation.