If you are planning for retirement and want to consider qualifying for Medicaid, the government's healthcare program for low-income seniors, you may need to be careful what kind of investment and annuity products you decide to use. Choosing the wrong one could knock you out of contention for Medicaid. There are two things to keep in mind when purchasing an annuity that will be considered an exempt asset for Medicaid. It must be irrevocable and nonassignable. In other words, you can't withdraw cash or give the annuity to another person. The annuity must also be actuarially sound, meaning the product must pay you back the entire amount of the purchase price within your estimated life expectancy.
A problem with immediate annuities that pay out over the life span of you and/or your spouse is that that income may take you out of the running for Medicaid. Another problem with annuities, especially deferred annuities is that if you suddenly find your self with large amounts of health care expenses, you might not be able to touch the money inside your annuity resulting in unwanted medical debt.
Read more: Family finances: The wrong kind of annuity could hurt if you need health care (Pittsburgh Post-Gazette) We recently noted a scary full-page "alert" ad targeting annuity owners for a fancy seminar and luncheon. It's true that if you have an annuity, problems could arise if you need nursing home care and hope to qualify for Medicaid, the state and federally funded program that covers the poor.
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