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Can I have a health savings account and Medicare?

Yes, but you can’t contribute to a health savings account (HSA) after you enroll in Medicare.

You can use money you’ve accumulated tax-free in an HSA for eligible medical expenses at any time. After you turn 65, you can even withdraw money tax-free from an HSA to pay your Medicare premiums.

An HSA is a tax-advantaged way to save for out-of-pocket medical expenses. Your contributions are tax deductible if you set up your own account, and they are pretax — lowering your taxable income -- if made through an employer plan.

The money grows tax-deferred in the account, and you can withdraw it tax-free for eligible health care expenses during any year.

In 2023, you can contribute to an HSA if you haven’t enrolled in Medicare and you have an HSA-eligible health insurance policy with a deductible of at least $1,500 for yourself only or $3,000 for family coverage. That’s true whether you get the insurance through your employer or on your own.

In 2023, you can contribute up to $3,850 if you have self-coverage or up to $7,750 for family coverage — plus a $1,000 catch-up contribution if you’re 55 or older. You have until the tax-filing deadline to contribute, which is April 15, 2024, for 2023 contributions.

If you had a high-deductible health insurance policy in 2022 and hadn’t enrolled in Medicare yet, you have until April 18, 2023, to make tax-deductible HSA contributions for that year. To qualify, you must have had a health insurance policy with a deductible of at least $1,400 for single coverage or $2,800 for family coverage in 2022. You can contribute up to $3,650 if you had self-only coverage or $7,300 for family coverage, plus an extra $1,000 if you were 55 or older.

When should I stop contributing to my HSA?

If you haven’t yet enrolled in Medicare and have an HSA-eligible insurance policy, you can contribute at any time. However, after you sign up for Medicare, you can’t make new contributions nor can your employer add to your HSA.

You must stop contributing to an HSA beginning the first month you’re enrolled in Medicare Part A or Part B, even if you also have a high-deductible health insurance policy through work. If you enroll in Medicare midyear, you may be able to make prorated contributions based on the number of months you had an eligible health insurance policy before your Medicare took effect.

For example, if your Medicare coverage starts July 1, you can make half the year’s contribution to the HSA. If you’re 55 or older in 2023, that means you can contribute up to $2,425 for the year if you have single coverage or $4,375 for family coverage.

What expenses are tax-free after I’m on Medicare?

At any age, you can withdraw HSA money tax-free to pay your health insurance deductibles, copayments, dental carehearing care, out-of-pocket costs for prescription and over-the-counter drugs, vision needs and other qualified health care expenses that insurance doesn’t cover.

You can also withdraw money tax-free from an HSA to pay a portion of eligible long-term care insurance premiums based on your age. For example, you can withdraw up to $4,770 for long-term care premiums in 2023 if you’re 61 to 70 and $5,960 if you’re 71 or older. Your spouse can withdraw up to that amount, too, based on his or her age. The eligible withdrawal limits for long-term care premiums are less for younger ages.

After you turn 65, you can withdraw money tax-free from your HSA to pay premiums for Medicare Part BPart D prescription drug coverage and Medicare Advantage plans, but not Medicare supplemental plans, such as Medigap. You can pay your Part A premiums with HSA money if you or your spouse didn’t work long enough to be eligible for premium-free Part A coverage.

If you have your premiums paid directly from your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses. Just remember to keep records of the costs.

Before age 65, if you use HSA money for nonmedical expenses, you’ll have to pay taxes and a 20 percent penalty on the withdrawals. The penalty disappears at age 65, but you’ll still have to pay taxes on withdrawals that aren’t for eligible medical expenses. To avoid the tax bill, look for qualified expenses, such as Medicare premiums, when taking withdrawals.

Keep in mind

You may have a deadline later. Some people who are still working at 65 for an employer with 20 or more employees delay signing up for Medicare Part A and Part B, so they can continue to contribute to an HSA. When you leave that job, you’ll need to sign up for Medicare within eight months of losing health insurance, or you’ll have to pay late enrollment penalties when you sign up for Part B.

If you work for a small employer with fewer than 20 employees, you usually have to enroll in Medicare at age 65 because Medicare generally becomes the primary coverage and employer coverage is secondary. If you don’t enroll in Medicare then, you could face big coverage gaps.

Already receiving Social Security? If you’re getting Social Security benefits, you’re automatically enrolled in Part A, and you don’t have the option to delay.

Another caveat: If you enroll in Part A after the month you turn 65, your Part A coverage can begin up to six months retroactively but no earlier than your birthday month. Keep this retroactive coverage date in mind when calculating how much you can contribute to the HSA for the first year.

In the example above, if you enroll July 1 in Medicare and your Part A coverage takes effect Jan. 1, you can’t make any HSA contributions for the year.

Updated January 26, 2023



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