When it comes to protecting retirement savings, many Americans worry about how long-term care costs could drain their nest egg. But on an episode of "The Ramsey Show," financial expert Dave Ramsey had a blunt message for one listener: trying to game the system could cross the line into fraud.
The Listener's Question
Ramsey's co-host, Ken Coleman, read a question from a listener concerned about how marriage could impact her 401(k) if her spouse ever needed long-term care.
"For late-in-life marriages, is it better to have a marriage certificate signed but not filed with our state if we want to protect a 401(k) from being drained to pay for long-term care for the other spouse?" the listener asked. She added that while she preferred to "do things legally," she worried that formalizing the marriage could jeopardize their financial future.
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Medicaid and Nursing Home Care
Ramsey began by explaining the difference between private-pay nursing homes and those that accept Medicaid.
"What you're saying is you want to plan to be on welfare," Ramsey told the listener. He noted that Medicaid nursing homes are designed for those in poverty, and while they provide necessary services, the quality of life may not match what private facilities can offer.
"If you're not in poverty and you're trying to pretend to be in poverty to protect your money, that's called fraud," Ramsey warned. "And the government will take your money anyway."
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Legal Protections for Spouses
Ramsey also pointed out that the law already provides some safeguards for spouses when one partner needs long-term care. For example, Medicaid rules generally allow the non-institutionalized spouse — sometimes called the "community spouse" — to remain in the family home. In many cases, certain retirement accounts, including 401(k)s, may also be protected from being spent down before Medicaid eligibility is determined.
"You're probably okay anyway," Ramsey said, suggesting that the listener's fears about losing her entire retirement account might be unfounded.
Alternatives to "Welfare Planning"
Rather than trying to avoid filing a marriage certificate to protect assets, Ramsey encouraged the listener to consider a few legitimate strategies:
- Long-term care insurance – Policies can help cover the cost of nursing home, assisted living, or in-home care.
- Self-insuring – Building sufficient wealth to pay for potential long-term care needs out-of-pocket.
- In-home care planning – Exploring ways to receive care at home instead of moving into a nursing facility.
Ramsey stressed that while Medicaid is a vital safety net for those with no other options, deliberately positioning oneself to qualify while having the means to pay is both unethical and illegal.
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A Matter of Integrity
To drive his point home, Ramsey drew a comparison: "This same lady would never in a million years go to a restaurant and figure out a way to eat their food and not pay them, and yet she's willing to do that with the government."
For those concerned about protecting their retirement savings while ensuring quality care for themselves or a spouse, Ramsey's advice was clear: plan ahead, explore your options, and stay within the bounds of the law.
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