If you apply for long-term care Medicaid in Wisconsin, your IRA will almost certainly be counted as an available asset. Whether it’s a traditional or Roth account makes no difference. However, the same type of account held by your spouse at home will be ignored entirely. That split shapes nearly every planning decision a married couple makes.
IRAs Count, Minus Early Withdrawal Penalties
Section 16.11 of the Wisconsin Medicaid Eligibility Handbook, the rulebook that county eligibility workers follow, considers individually owned retirement plans to be available assets. This includes:
- Traditional and Roth IRAs
- SEP and SIMPLE IRAs
- Keogh plans, which are used by the self-employed
The countable value is the balance minus any penalties for early withdrawal. Income taxes that you would owe are not deducted. So, the figure that Medicaid uses can be significantly higher than what you would actually keep after cashing out.
Most people applying for nursing home or family care coverage are over the age of 59 ½, when early withdrawal penalties stop. For these people, the full amount is usually counted.
One exception: an IRA annuity that is already paying out is evaluated under annuity rules.
401(k)s and Employer Plans Have More Exceptions
Employer-sponsored plans receive different treatment. This group includes 401(k), 403(b), and 457(b) plans, as well as the federal Thrift Savings Plan and pensions like the Wisconsin Retirement System.
An employer plan is not considered an asset if any of the following apply:
- You are already receiving regular payments from it.
- You’re still employed and would need to quit your job in order to receive the money.
- You do not have access to the principal.
If none of those fits and you can cash out the plan, its value after penalties (but before taxes) is counted.
Watch rollovers. Moving a 401(k) into an IRA converts it, and stricter IRA rules apply from that point on.
Your Spouse’s Retirement Accounts Are Protected
This rule surprises most families. When one spouse needs care and the other stays home, the IRAs and employer plans of the at-home spouse are disregarded. They don’t count towards eligibility. They also don’t contribute to the spousal impoverishment assessment of assets.
The rule traces back to Keip v DHFS, 2000 WI App 28, where the Wisconsin Court of Appeals ruled that an ineligible spouse’s IRA is excluded from consideration when deciding whether the applying spouse qualifies for benefits. One limitation applies: inherited IRAs don’t receive this protection.
Wisconsin updated the handbook again in 2026. In a release effective May 19, 2026, the Department of Health Services dropped an earlier condition that made a spouse’s IRA annuity exempt only if that spouse had funded it. Annuity disclosure and beneficiary designation requirements still apply in long-term care cases.
Withdrawals and Payments Follow Different Rules
How money leaves a retirement account affects how Medicaid sees it.
IRA withdrawals are not treated as income. Wisconsin considers them to be a transfer of assets from one location to another, so the money is simply counted wherever it ends up, such as in your checking account.
Regular payments from a 401(k) or pension are different. They count as unearned income in the month you receive them, which can affect eligibility and how much you contribute to the cost of care each month.
Mistakes That Can Cost You Eligibility
Families under pressure often take one of these actions:
- Giving retirement savings to children. Transfers of less than fair market value within the five-year look-back period, as required by Wis. Stat. § 49.453, can trigger a penalty with no coverage.
- Withdrawing from an IRA in a rush. The withdrawal will be taxable, and the money will still count until it is spent on a permitted activity.
- Depleting the healthy spouse’s funds, which is often unnecessary since those funds are already protected.
- Failing to update beneficiary designations. If the primary caregiver names the spouse as beneficiary, the protected savings can pass directly to the person who needs it.
Protect Your Retirement Savings Before a Crisis
Medicaid planning works best before a nursing home admission, not after one. A few months of preparation can preserve options that disappear once an application is filed. Contact Collins Law Firm to review how your IRAs, 401(k)s, and beneficiary designations fit into your estate plan, and to build a strategy that protects both spouses.