Q. My husband may soon need nursing care and I will need to apply for a Medi-Cal subsidy to help with the cost. Our incomes are modest and, aside from our home, most of our savings is in the form of our IRA’s. A friend thought I would have to cash them out and “spend down” the proceeds before my husband would be eligible. Does that sound right to you?
A. Not at all. I am sure your friend means well, but he or she is misinformed. Although the Medi-Cal rules will, as of January 1, 2026, once again impose resource “caps” for eligibility, funds held inside an Individual Retirement Account (“IRA”) are not counted in determining whether your nonexempt assets exceed the Medi-Cal resource ceilings, provided that certain requirements are met. Here is how Medi-Cal will, once again, views IRA’s in 2026 and beyond:
IRA In the Ill Spouse’s Name: As the spouse needing nursing care, the IRA in your husband’s name will not be counted in determining whether his assets exceed the Medi-Cal resource ceilings, provided that he is receiving periodic distributions of “income and principal”. This requirement is easily satisfied by drawing out the Required Minimum Distributions (“RMD’s”) under IRS rules. So long as he takes the RMD’s, whether as monthly, quarterly or annual draws, Medi-Cal will treat his entire IRA as “unavailable” and will not count its value when determining his eligibility. Medi-Cal will, however, treat the RMD distributions as income, which may then go toward his “co-pay” (which Medi-Cal calls ‘Monthly Share of Cost’). Note: ROTH IRA’s, which do not require any distribution under IRS rules, must still distribute some interest and some principal in order not to be in counted when tallying up your husband’s countable resources.
IRA in Your Own Name: As the At-Home spouse, the IRA in your own name does not count at all, regardless of whether you are receiving any distributions. In essence, the Medi-Cal rules encourage you to conserve your retirement nest egg and use it for its intended purpose.
We generally suggest that a person in your husband’s situation take out the bare minimum from his IRA as necessary to comply with both Medi-Cal rules and IRS rules. This strategy keeps his Share of Cost low and still allows him to qualify for a Medi-Cal subsidy to cover the remaining cost of care. Note, also, that there are strategies available to minimize the RMD effect upon income, but that discussion is beyond the scope of this short article
Also know that your own IRA’s can be worth any amount and still be non-countable. There is no upward ceiling on value. In the eyes of Medi-Cal, the only difference between your husband’s IRA and yours is that he, as the “ill spouse”, must be receiving RMD’s in order to render his IRA’s non-countable. And, by the way, Medi-Cal applies the same rules to other retirement accounts, such as 401(k)’s, 403(b)’s, Roth IRAs, and the like. So, in your case, provided that your other savings and nonexempt assets do not exceed the Medi-Cal resource ceilings (projected to be $130,000 for the “Ill Spouse” and at least $157,920 for the At-Home, spouse after January 1, 2026), your husband should qualify for a Medi-Cal nursing home subsidy. The other good news is that IRA’s are exempt from recovery after his death, provided that the designated death beneficiaries are named individuals, rather than the owner’s “estate”.
Caution: We find that couples in your situation are sometimes told that they need to convert the money in their IRA’s into an annuity in order to render the proceeds exempt for Medi-Cal purposes. That is not the case, and such conversions are almost always both unnecessary and inadvisable.
In short, Medi-Cal’s treatment of IRA’s and other retirement accounts is designed to help individuals and couples manage the high cost of nursing care without unduly draining their retirement nest eggs.