Reverse Mortgages, Social Security, and Medicaid: The Basics
As we’ve mentioned in other articles, retirees need to keep a close eye on their income to ensure that their entitlements are not negatively impacted. Earning too much from a part-time job could mean a reduction in what you receive from Social Security, for instance. It’s a difficult situation to find yourself in, but the good news is that a reverse mortgage will have no impact on your Social Security payments, or on your Medicare coverage.
While the income from a reverse mortgage will not affect any of your entitlement programs, it may affect public assistance programs designed for low-income individuals. For instance, it could have an effect on your Medicaid assistance, as well as other types of public assistance. However, there are ways around this.
First, many public assistance programs have eligibility requirements based on your liquid assets at the end of the month. For a couple on Medicaid, the maximum you can have at the end of the month is $3,000. To get around this, you could consider going with a lump sum payment from your reverse mortgage and reinvesting or spending it immediately.
However, understand that doing this in a way that reduces your monthly costs could backfire. For instance, if you use it to pay off the remaining small balance on your mortgage, the monthly savings could push you over the limit for Medicaid.
A better option might be to go with an adjustable rate mortgage where you can set your monthly payments so that you know they will not push you over the limit. This allows you to improve your financial situation, but also guarantees that you will not exceed the maximum limits for eligibility. Of course, that only covers Medicaid – there are many other public assistance programs out there, and each has its own requirements.