What happens if an elderly person runs out of money?

According to a 2025 analysis, a rising number of older Americans are living below the poverty line, forcing many to confront a difficult reality. When this happens, a senior's retirement income sources are exhausted, forcing them to rely on limited income streams or public assistance to cover essential costs. The consequences of a financially depleted retirement can include losing one's home, moving to a low-income or Medicaid-funded facility, or living in poverty. Navigating the options requires careful planning and understanding of the available resources.

Quick Summary

When an elderly person depletes their savings, they must rely on limited income sources like Social Security and pensions. Options include applying for government programs such as Medicaid, exploring subsidized housing, seeking family support, and making significant lifestyle adjustments.

Key Points

• Government Safety Nets: Exhausted seniors are not left penniless; instead, they become dependent on government programs like Social Security, SSI, and Medicaid, which provide basic income and health coverage.

• Long-Term Care Options: Medicaid is the primary payer for long-term care for low-income seniors, covering nursing home costs and some home-based care, though it involves strict income and asset requirements.

• Housing Alternatives: Subsidized housing options through programs like HUD's Section 202 are available for low-income seniors, but often have significant waiting lists.

• Family Obligations: Over half of U.S. states have filial responsibility laws that can legally obligate adult children to financially support their parents who cannot pay for their own necessities.

• The Spend-Down Process: Seniors with income just over Medicaid limits can often "spend down" their excess income on medical expenses to qualify for coverage, which is a key part of financial strategy for many.

• Home Equity Options: For homeowners, a reverse mortgage is a last-resort option to tap into home equity, but it comes with high costs and can deplete inheritance for heirs.

• Professional Guidance: Navigating the complex eligibility rules for various benefit programs is challenging, making it critical to consult with specialists like elder law attorneys or financial planners.

When an elderly person runs out of their retirement savings, they face potential poverty and reliance on limited income sources, often Social Security. The outcome depends on remaining assets and family support, with accessing help involving various government programs.

The Role of Government Assistance Programs

Government programs provide a safety net for financially struggling seniors, but eligibility and application can be complex. Local agencies or elder law attorneys can offer assistance.

• Medicaid: This program assists low-income seniors, covering long-term care costs like nursing homes or in-home care, unlike Medicare.
• Supplemental Security Income (SSI): SSI provides monthly cash for low-income seniors over 65 to help with basic needs.
• Supplemental Nutrition Assistance Program (SNAP): SNAP offers benefits via an EBT card for purchasing food.
• Low-Income Housing Assistance: HUD programs like Section 8 or Section 202 provide rental assistance for eligible elderly individuals.
• Low Income Home Energy Assistance Program (LIHEAP): LIHEAP helps with home heating and cooling costs.

Accessing Long-Term Care with Medicaid

Medicaid is a key resource for long-term care after assets are depleted, often involving a "spend down" process.

1. "Spending down" assets: In some states, individuals can become eligible for Medicaid by using excess income on medical expenses. Once the spend-down amount is met, Medicaid covers remaining costs for that period.
2. Asset protection: Planning can help protect some assets from Medicaid consideration, but strict rules and a five-year lookback period apply. Consulting an elder law attorney is crucial here.
3. Medicaid beds: Many nursing homes accept Medicaid patients, though waitlists can occur.

The Impact of Filial Responsibility Laws

In many states, adult children may be legally obligated to support indigent parents. Unpaid care facilities can sue adult children in states with these laws, although enforcement varies. Families in such states should plan with an elder law attorney to understand potential obligations.

Comparison of Housing Options for Seniors with Limited Finances

Feature	Subsidized Housing (e.g., Section 202)	Medicaid-Certified Nursing Home	Reverse Mortgage (for homeowners)
Best For	Seniors with low income who can live independently or with minimal support.	Seniors requiring 24/7 skilled nursing care who have exhausted all other financial resources.	Seniors with home equity who wish to stay in their home and need a supplement to their income.
Cost	Rent is typically based on a percentage of the senior's income (e.g., 30%).	Most or all income (minus a small personal needs allowance) is contributed towards care costs.	Upfront and ongoing fees can be very high, and the loan accrues interest over time.
Trade-offs	Often has long waiting lists for a limited number of units.	Care can be excellent, but many may prefer to age at home; equity in the home is lost.	Strips equity from the home, reducing or eliminating the value for heirs; risky if home maintenance or property taxes are not paid.
What to Watch For	Availability is limited, so apply as early as possible.	The facility must be Medicaid-certified; not all are.	High fees, scams, and impact on potential inheritance for heirs.

Conclusion: Proactive Planning is Essential

Running out of money is challenging, but seniors are not without options due to government programs like Medicaid, SSI, and subsidized housing. These require navigating complex eligibility and potential wait lists. Family involvement and potential legal obligations under filial responsibility laws are also factors. Proactive planning, exploring benefits, family discussions, and consulting professionals like elder law attorneys are crucial for making informed decisions.

One Outbound Link

For a free, easy-to-use tool to find benefit programs for which seniors may be eligible, visit the National Council on Aging's BenefitsCheckUp website.

Frequently Asked Questions

What is the very first step to take if an elderly person runs out of money?

The first step is to conduct a thorough financial assessment of the elderly person's remaining income (like Social Security), expenses, and any limited assets. Then, immediately investigate eligibility for government assistance programs, such as Medicaid for healthcare and long-term care needs, and SSI for a basic income supplement.

Does Medicare or Medicaid cover nursing home care?

Original Medicare does not cover long-term care, such as extended nursing home stays. Medicaid, however, is the largest payer for long-term care in the U.S. for low-income individuals, covering nursing home costs and some in-home services once eligibility requirements are met.

How does a Medicaid 'spend down' work?

A Medicaid spend down allows an individual with income exceeding the state's eligibility limit to qualify for Medicaid by spending their excess income on medical expenses over a specific budget period. Once the spend-down amount is met, Medicaid covers the remaining costs.

Can an adult child be legally responsible for their parent's debt?

In over half of U.S. states, filial responsibility laws exist, which can legally obligate adult children to pay for their indigent parents' necessities, including medical and nursing home bills. The specific obligations vary significantly by state.

What are the housing options for a low-income senior with no money?

Options for low-income seniors include applying for public housing through their local Public Housing Agency (PHA) or specialized programs like HUD's Section 202, which provides affordable housing for the elderly. Waitlists are often long, so applying early is essential.

What is a reverse mortgage and is it a good option when money runs out?

A reverse mortgage allows homeowners aged 62 or older to convert a portion of their home equity into cash without selling the home. It can provide needed income but is generally considered a last resort due to high costs, accumulating interest, and the erosion of home equity that would otherwise go to heirs.

Where can seniors get help with day-to-day expenses?

Besides SSI, seniors can access assistance for specific needs through programs like SNAP for food, LIHEAP for energy bills, and local Area Agencies on Aging (AAA) for services like meal delivery, transportation, and legal aid.