Medicare is the health plan that exists specifically to address the medical needs of those at or past the age of retirement. It is common for older adults to stop paying for private insurance and instead start supplementing a Medicare policy once they decide to retire or reach the age of 65.

A noteworthy number of older adults who initially receive Medicare benefits will eventually need Medicaid benefits instead. Medicaid is much more comprehensive than Medicare and covers more intensive needs, like the need for skilled nursing work in your home or the cost of living in a nursing home.

One of the biggest mistakes that you can make when it comes to planning for your retirement and your estate is to overlook planning for Medicaid as a New Jersey resident.

Planning even if you might not need it is usually smart

Increased health issues are a common consequence of growing older. With age comes both wisdom and diminished strength, decreased flexibility, joint pains and severe conditions like Alzheimer’s that can lead to dementia. Even people who take good care of their bodies will eventually start to feel the impact of aging.

In some cases, medical needs later in life may force someone to move into an assisted living facility because they cannot provide for all of their own medical needs. Especially if you already have an estate plan in place and either private health insurance or Medicare, the idea of sitting down just to discuss your potential future ability to qualify for Medicaid might seem unnecessary and stressful.

A lot of people put this process off until they realize they have no option but to seek Medicaid benefits. Waiting that long is almost always a mistake because it will likely mean that you incur a Medicaid penalty.

Medicaid applicants must qualify based on both income and assets

In order to start receiving Medicaid benefits, an applicant has to show that their income is below a certain threshold which may not be that challenging for those on a fixed retirement income. However, they will also have to show that their total assets aren’t so valuable that they prevent them from qualifying.

With the exception of your home, almost everything from your investment accounts and retirement savings to your personal possessions can count against your ability to qualify. You will have to liquidate or use those assets to cover your expenses. If you tried to transfer them to loved ones or put them in a trust shortly before you apply, the five-year Medicaid look-back period means that the experts reviewing your application will likely locate those transfers and apply a penalty to your application.

You will have to pay out-of-pocket the full value of the assets transferred or given away before you can start receiving benefits. In other words, Medicaid planning early during your retirement is smart because waiting until you need it could mean diminishing your current assets and your future legacy.