For individuals who begin with $100,000, Medicaid will not be a straightforward possibility.
As a part of an prolonged examine on the dangers confronted by households approaching retirement, we simply accomplished a mission that targeted on the dangers related to medical and long-term care prices.
Because it seems, whereas medical dangers are extremely unsure and probably costly, a lot of those dangers are insured by Medicare (and Medicaid for these eligible for each applications). Lengthy-term care dangers, in distinction, are usually not nicely insured. Solely 3 p.c of all U.S. adults or 15 p.c of these ages 65+ have long-term care insurance coverage. And a serious discovering was that individuals had little thought of the chance of needing long-term care or of the potential prices of that care.
The implications of households underestimating their healthcare dangers are that they might not plan nicely to guard themselves towards these dangers. With out the suitable insurance coverage or assets, older households might should make substantial changes or think about less-preferred choices. The query is, how reasonable are these contingency plans?
The evaluation was primarily based on a 2024 Greenwald Analysis on-line survey of 508 people ages 48-78 with at the very least $100,000 in investable property. The survey included a query concerning what contingency plans respondents would think about if they may not afford their medical or long-term care bills. These contingency plans had been then in comparison with actuality utilizing knowledge from the Well being and Retirement Research – a nationally consultant pattern of these over age 50 who’re interviewed each two years.
Curiously, about 60 p.c of survey respondents mentioned they’d think about spending all the way down to Medicaid, whereas solely 30 p.c mentioned they’d think about using their residence fairness or transferring in with their youngsters (see Determine 1). Nevertheless, many of those preferences is probably not reasonable.
Many older households who imagine they will at all times fall again on Medicaid might not understand that this system’s earnings and asset limits require impoverishment. In 2025, the month-to-month earnings restrict for Medicaid eligibility for these over age 65 is usually round $2,800 ($5,600 for {couples}) and the asset restrict is usually $2,000 ($3,000 for {couples}), however varies by state.
Amongst households with greater than $100,000 in investable property, like these in our survey, virtually none would qualify primarily based on the usual earnings guidelines as a result of their Social Safety profit and outlined profit earnings would put them above the restrict. A number of states have particular earnings guidelines for long-term care with barely increased limits. Even then, 70 p.c of households in our pattern wouldn’t qualify. In actuality, solely 15 p.c of households with greater than $100,000 in preliminary property will truly find yourself on Medicaid (see Determine 2), in comparison with the 60 p.c of households who suppose that spending all the way down to Medicaid is an possibility for them.
One of many least standard contingency choices for financing healthcare prices is tapping residence fairness. Lower than a 3rd of households mentioned they’d think about it. Nevertheless, in actuality, over 40 p.c will faucet residence fairness in retirement – both by getting a second mortgage, making use of for a house fairness line of credit score or different loans towards the home, or downsizing and transferring to a much less invaluable home (see Determine 3).
Lastly, one other unpopular possibility for managing healthcare wants amongst respondents is transferring in with youngsters. Once more, lower than a 3rd say they’d think about this feature. Curiously, in the true world, solely a few quarter of older households in our wealth group find yourself dwelling with their youngsters (see Determine 4). So, this feature does seem to be the least most well-liked back-up if plans fail.
In brief, the uninsured parts of healthcare prices in retirement – notably these related to long-term care – might be substantial, and older households should not have an correct notion of those dangers. Consequently, many will find yourself with insufficient assets. When members in our survey – people having $100,000 or extra in investable property – had been requested how they’d cope with such a scenario, about 60 p.c mentioned they’d spend all the way down to qualify for Medicaid. That isn’t an affordable possibility for many given this system’s tight earnings and asset necessities. In truth, solely 15 p.c of this group is ever more likely to qualify for Medicaid. Respondents had been much less obsessed with tapping their residence fairness, however many (over 40 p.c), actually, do faucet residence fairness as a supply of help.
