Imagine entering retirement with $50,000 in the bank but still owing $20,000 across credit cards, a car loan, and perhaps a remaining mortgage balance. Paying everything off immediately might sound like the obvious move, especially when eliminating debt could lower monthly expenses for the rest of retirement. But if long-term care could be on the horizon, retirees also need to understand how spending savings today could interact with Medicaid long-term care eligibility later. The rules are far more complicated than simply getting your bank balance below a magic number, and eligibility standards vary by state and program. Before moving $20,000 (or giving any of that money to family), here’s what retirees should understand about debt, assets, and Medicaid planning.
Editor’s note: In this article, “spend down” refers generally to reducing countable resources through legitimate expenditures while preparing for possible Medicaid long-term-care eligibility. It shouldn’t be confused with state Medicaid programs that use an income or medically needy spend-down calculation.
