Can I have a health savings account and Medicare?

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 eligible health insurance 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 2024, that means you can contribute up to $2,575 for the year if you have single coverage or $4,650 for family coverage.

When can I take tax-free HSA withdrawals?

At any age, you can withdraw HSA money tax-free to pay your health insurance deductibles, copayments, dental care, hearing 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, in 2024 you can withdraw:

• 40 or less: $470
• 41 to 50: $880
• 51 to 60: $1,760
• 61 to 70: $4,710
• 71 or older: $5,880

Your spouse can withdraw up to that amount, too, based on their age.

After you turn 65, you can withdraw money tax-free from your HSA to pay premiums for Medicare Part B, Part D prescription drug coverage and Medicare Advantage plans, but not Medigap plans. 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 pay your premiums 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.

You have an unlimited amount of time to withdraw money from the HSA for eligible expenses incurred since you opened the account. You can pay cash for current medical expenses and then take the tax-free withdrawals from the HSA years later.

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 money out.

Keep in mind

Some people delay signing up for Medicare Part A and Part B because they’re still working at 65 and want to continue contributing to an HSA, especially if their employer matches their contributions.

People who work for a large employer with 20 or more employees can delay enrolling in Medicare, but need to sign up within eight months of leaving the job and losing health insurance, or they’ll have to pay late enrollment penalties when they 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 typically becomes the primary insurer 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. So 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. Keep this retroactive coverage date in mind when calculating how much you can contribute to the HSA for the first year.

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