No, an IRA withdrawal does not count as earnings for Medicaid work requirement exemptions. It is not wages, and withdrawing does not count as work activity. The distinction matters because Medicaid offers a separate income shortcut. A traditional IRA withdrawal may help meet that income test even though it is not earned income.
Official resources:
- Check eligibility on CMS’s official study page — Use this page to check the study’s participation requirements.
- Register through Healthfirstcolorado’s official page — Use this page to review requirements and register directly.
Table of Contents
- Why an IRA withdrawal is not earnings
- How the $580 income option changes the answer
- Who does not need to meet the rule at all
- Why using a withdrawal can cost you coverage
Why an IRA withdrawal is not earnings
Earned income means pay for work. The IRS says this includes wages, salaries and tips, and expressly excludes pensions and annuities, which places IRA distributions outside earned income, according to the IRS earned income table.
That definition controls the earnings question. A retiree taking a traditional IRA distribution has income, but not earnings from work.
How the $580 income option changes the answer
Certain non-pregnant adults ages 19-64 in Medicaid expansion must complete 80 hours per month of work or community engagement, with states generally implementing by Jan. 1, 2027, according to the CMS fact sheet on the community-engagement rule. Enrollees can instead meet the rule with monthly income of at least 80 times the federal minimum wage, described by CMS as $580 per month in 2026.
That shortcut is broader than earnings. Justice in Aging reports that it can be earned or unearned income and can be deemed from other Medicaid household members, so a traditional IRA withdrawal may count as income even though it is not wages, according to the Justice in Aging explainer on community-engagement requirements. Withdrawing still does not make you a worker. CMS defines qualifying activity as employment, work-program participation, community service, or at least half-time education.
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Who does not need to meet the rule at all
Many retirement-age readers will fall outside the rule. Adults 65 or older and Medicare enrollees are exempt and need not meet the requirement.
Other exemptions include people who are disabled or medically frail, plus parents and caregivers in specific cases: If you fit one of these groups, the earnings-versus-income question does not apply. Keep proof of age, Medicare enrollment, disability status, or caregiver role for the state.
- parent or caregiver of a child under 14
- caregiver of a person with disabilities
- person who is disabled or medically frail
Why using a withdrawal can cost you coverage
A traditional IRA withdrawal that helps reach $580 also raises countable MAGI income. That higher MAGI figure can reduce or end MAGI-based Medicaid eligibility. HealthCare.gov says to include most IRA and 401(k) withdrawals in household MAGI income, but not qualified distributions from a designated Roth account, according to the HealthCare.gov guide to household income.
A Roth withdrawal may therefore affect the work rule and eligibility differently than a traditional IRA withdrawal. State-agency verification rules control how income is counted and proved. Check with your state Medicaid agency before taking a withdrawal to meet the $580 test.
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