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Moving into a nursing home brings up lots of financial worries – especially what happens to your hard-earned pension and other retirement income. Many seniors and their families worry that nursing homes will simply take all their money, leaving nothing for personal needs or spouses. I’ve compiled this comprehensive guide to help you understand exactly what happens to your pension when you enter a nursing home.
What Really Happens to Your Pension in a Nursing Home
The short answer is no, nursing homes don’t “take” your pension automatically. However, you will probably have to pay for your care with most of your monthly income, along with your pension.
If you’re getting Medicaid to pay for nursing home care, most of your monthly income must go toward paying for your care. This includes pension payments, Social Security benefits, and other retirement income. Then, Medicaid pays the difference between what you pay and what the nursing home charges because it has a contract with Medicaid.
Not all the time, though. There are important exceptions that let you keep some of your income.
The Personal Needs Allowance – What You Can Keep
Every state allows nursing home residents on Medicaid to keep a small amount of their monthly income for personal expenses. This is called the “Personal Needs Allowance.”
For example, in Michigan, you’re allowed to keep $60 per month for personal expenses like:
- Haircuts at the nursing home salon
- Postage stamps
- Phone service in your room
- Personal hygiene items
- Small gifts for grandchildren
- Magazines or books
The exact amount varies by state, but it’s typically between $30-$60 per month.
Other Exceptions: When You Can Keep More of Your Pension
Beyond the personal needs allowance, there are several situations where you might be able to keep more of your pension:
1. If You Have a Spouse Living at Home
This is a big one! If your spouse isn’t in a nursing home, they may be entitled to keep some of your income. Medicaid rules allow for a “Minimum Monthly Maintenance Needs Allowance” (MMMNA).
For example, if your wife receives only $600 monthly from Social Security, Medicaid might allow her to keep up to $1,292 of your income, bringing her total to $1,892 per month. With high housing costs, this might increase to nearly $2,900 monthly.
2. If You Have Dependent Children
Some of your monthly income can be saved to help a child under 18 or an adult child who depends on you instead of going to a nursing home.
3. If You Have Unpaid Medical Bills
Got old medical bills you still owe? Medicaid may allow you to use some of your current monthly income to pay these off instead of paying it to the nursing home.
4. If Your Nursing Home Stay Will Be Short-Term
If your doctor confirms you’ll return home within six months, Medicaid might allow your income to be used for maintaining your residence – paying property taxes, utilities, mortgage or rent – rather than being paid to the nursing home.
Common Misconceptions About Nursing Homes and Your Money
There’s a lot of misinformation floating around. Let’s clear up some common myths:
Myth #1: “The nursing home will take my house.”
Truth: Nursing homes can’t seize your home or other assets. However, if you need Medicaid to pay for care, your home might be subject to Medicaid estate recovery after your death.
Myth #2: “I’ll lose everything when I go into a nursing home.”
Truth: While nursing home costs are high (often $100,000+ annually), there are legal ways to protect some assets and income.
Myth #3: “Medicare will cover my nursing home stay.”
Truth: Medicare only covers limited skilled nursing care after a hospital stay – not long-term care. After 100 days, Medicare stops paying completely.
Can a Nursing Home Become Your “Representative Payee”?
In some situations, a nursing home can be appointed as your “representative payee” for federal benefit payments. This means the facility can directly receive payments from:
- Social Security Administration
- Department of Veterans Affairs
- Department of Defense
- Railroad Retirement Board
- Office of Personnel Management
This arrangement creates potential risks for financial elder abuse or administrative errors. Some facilities have accidentally overpaid themselves with residents’ money.
As Eric Carlson, directing attorney of Justice in Aging, puts it: “If a resident has dementia to the extent that it limits his or her ability to handle finances, a trusted authorized representative, often a family member, should handle income and bills. Some residents do not have such representatives, and these are the residents at greatest risk.”
How to Protect Your Pension and Other Assets
While you’ll need to use your pension for care if you’re on Medicaid, there are legitimate strategies to protect some assets:
1. Set Up a Power of Attorney
Designate someone you trust to manage your finances if you become unable to do so yourself. This should be someone who will act in your best interest.
2. Ask About Financial Safeguards
When choosing a nursing home, inquire about what protections they have to safeguard residents’ money.
3. Use Direct Deposit
Have your pension payments directly deposited to your bank account to prevent them from being lost or stolen.
4. Don’t Let the Nursing Home Receive Your Payments
Whenever possible, have pension payments sent to your bank account, not to the facility.
5. Don’t Bank With the Nursing Home
Avoid using banking services provided by the nursing home as this could make it easier for them to access your funds.
6. Consider an Irrevocable Trust
Creating an irrevocable trust and appointing a trustee can protect some assets from being used for nursing home care. This is complex and requires advance planning with an elder law attorney.
7. Look Into Long-Term Care Insurance
If you’re not yet in a nursing home, long-term care insurance can help cover costs without depleting your pension and other assets. However, this insurance is expensive and you may never use it if you don’t need nursing home care.
What About Social Security Benefits?
Similar to pensions, your Social Security benefits will generally go toward paying for nursing home care if you’re on Medicaid. However, if you enter a medical facility where Medicaid covers more than half the cost, your monthly SSI benefits might be reduced to $30 or less.
In some cases, if you’re only in the nursing home for a short rehabilitation stay, your benefits might be less affected.
State-Specific Considerations
Rules vary by state. For example:
- Minnesota: Irrevocable trusts can be used to protect assets from nursing home costs.
- Texas: If you own property, you’ll generally be expected to sell it to cover nursing home costs before qualifying for Medicaid.
- New Brunswick (Canada): The Department of Social Development covers nursing and rehabilitation services, but you must pay room and board costs if you can afford to.
When to Seek Professional Help
These rules are complex, and mistakes can be costly. Consider consulting an elder law attorney if:
- You’re planning for possible future nursing home care
- You or a loved one are about to enter a nursing home
- You’re trying to protect assets for a spouse
- You have questions about Medicaid eligibility
An elder law attorney can help you understand your options and ensure your rights are protected.
Resources for More Information
If you need additional guidance, check out these resources:
- National Consumer Law Center: nclc.org
- Eldercare Locator: eldercare.acl.gov
- National Council on Aging: ncoa.org
Final Thoughts
While the prospect of losing your pension to nursing home costs is scary, understanding the rules can help you make better decisions. By planning ahead and knowing your rights, you can ensure that your income is used appropriately – both for your care and for maintaining your quality of life and supporting your loved ones.
Remember, nursing homes don’t simply “take” your pension – but without proper planning, most of your monthly income will go toward your care costs. Working with an experienced elder law attorney is your best bet for navigating these complex financial waters.
Have you had experience with managing finances for a loved one in a nursing home? What strategies worked for your family? We’d love to hear your experiences and questions in the comments below.
Will Social Security send my loved one’s check directly to their nursing home?
Social Security payments are generally made directly to recipients. [09] Optional state supplement (OSS) benefit programs may pay recipients directly or they may pay the nursing home on recipients’ behalf.
If a family member is sick or injured and can’t handle their money, they can name you or someone else, even a nursing home, as their representative payee. You can have the Social Security Administration send money directly to your loved one’s nursing home if the home is their representative payee. [10].
For a nursing home patient who meets their state’s Medicaid income and asset limits, Medicaid will work with the nursing home to ensure it receives the patient’s liability, or the patient’s share of the cost of care. Each patient’s liability is different and depends on the patient’s situation and the cost of the nursing home.[11]
How Social Security benefits help pay for a nursing home stay
Social Security benefit payments can be used to pay nursing home expenses. The four types of Social Security benefits are:
- Social Security retirement
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
- Optional state supplements (OSS)
| Benefit Program | Who Qualifies? | Average Monthly Payment (2025) | Can It Be Used for Nursing Home Care? | Other Notes |
|---|---|---|---|---|
| Social Security Retirement | Workers (62+ years) and their spouses who paid into Social Security | $1,979 | Yes | Based on past earnings |
| Social Security Disability Insurance (SSDI) | People unable to work due to disability | $1,581 | Yes | Based on past earnings; converts to retirement benefits at full retirement age |
| Supplemental Security Income (SSI) | Low-income seniors (65+ years) and disabled individuals | $590 | Yes | Often paired with Medicaid, which may cover care services |
| Optional State Supplements (OSS) | SSI recipients in some states | Varies by state | Yes | Some states pay facilities directly; others pay individuals |
Will Nursing Home Expenses take Pension and Social Security?
FAQ
What happens to my money when I go into a nursing home?
A nursing home doesn’t TAKE anything. They send you a bill each month. You pay it with your assets. You will probably have to sell your home to pay your bill if you are single and own one. If you have long term care insurance you use that to pay for your care.
What benefits do I lose if I go into a care home?
If your care home fees are paid in full or part by the local authority, National Health Service (NHS) or other public funds, payment of Disability Living Allowance (DLA) care component, Personal Independence Payment (PIP) daily living component, Adult Disability Payment (ADP) daily living component, Attendance .
Can a nursing home take a person’s pension?
Can a nursing home take my loved one’s Social Security or pension checks? Based on the law, a nursing home usually can’t take a patient’s money, whether it comes from Social Security, a pension, a retirement account, or something else.
Is it possible to lose your pension?
Yes, you can lose some or all of your pension benefits if you do certain things, like quit your job before the plan’s vesting schedule says you are fully entitled to them. Other situations are when an employer goes bankrupt or the plan ends, which can greatly reduce benefits. However, the Pension Benefit Guaranty Corporation (PBGC) may offer some protection.