Will a Reverse Mortgage Loan Affect Social Security?

October 22, 2020

Receiving funds from a reverse mortgage loan will not impact your Social Security.  Similarly, a reverse mortgage has no impact on Medicare. Both Social Security and Medicare are non-means-tested programs, meaning these public benefits are not dependent on your amount of income, savings, capital, or assets, including how much money you receive from a reverse mortgage loan.

However, if you are on Medicaid or receive Supplemental Security Income (SSI), any reverse mortgage proceeds may affect your benefits, because eligibility for these programs is tied to your current financial assets and monthly income. Unlike Social Security and Medicare, Medicaid and SSI are needs-based programs.

Because states set their own eligibility standards, it’s incumbent you know what your particular state’s income and asset limits are. If you are an SSI or Medicaid recipient and your monthly reverse mortgage proceeds put you over your state’s limit, you could jeopardize your eligibility in these needs-based government programs. Therefore, the needle you must thread is making sure the total of your income and reverse mortgage proceeds for a particular month does not exceed your state’s limit.

One workaround is simply spending your reverse mortgage proceeds in the same month you receive them. Another is opening your reverse mortgage as a line of credit. This strategy generally won’t impact SSI or Medicaid, because a reverse mortgage line of credit is not counted as a liquid asset or income until you actually use it. If you use the line, however, be sure to spend the funds in the same month they are received. If the drawn funds are not spent, they could accumulate and exceed the allowable limit for SSI or Medicaid in your state. To be safe, share your particular situation or plan with your financial advisor or government benefits expert to ensure you will not endanger your eligibility in these needs-based programs.

FAQs

Can a reverse mortgage affect Social Security or Medicare?

Reverse mortgage payments have no impact on Social Security or Medicare eligibility. Regardless of how much cash you receive from a reverse mortgage, the money will have no bearing on these public, non-needs-based benefits. Reverse mortgage payments, however, could impact needs-based programs like Medicaid or SSI.

Does a reverse mortgage count as income?

A reverse mortgage gives you the means to convert some of your home equity into cash. As such, a reverse mortgage is considered a loan, not income. When you sell or move out of your home, pass away, or do not comply with your loan terms, the loan must be repaid.

Does a reverse mortgage affect Medicaid?

Taking out a reverse mortgage could affect Medicaid because eligibility is based on your income and financial assets. If you did not spend all of your reverse mortgage proceeds in the month you received them and are left with countable assets (reverse mortgage funds plus other savings, cash, etc.) that exceeded Medicaid asset limits, you could endanger your Medicaid eligibility. To be safe, contact your Medicaid expert before proceeding with a reverse mortgage.


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