If you or your spouse is approaching Medicare age, you may be wondering how that will affect your Health Savings Account (HSA). It’s vital to understand how Medicare and HSAs interact because there are fines and penalties for making improper contributions. Here’s what to know to help protect your finances and health while also helping to ensure that you’re following Medicare rules.

Understanding Medicare

Medicare is a federal health insurance program for people who are 65 and older, people under age 65 with certain disabilities, and people of any age with End-Stage Renal Disease (ESRD). You can enroll in Medicare when you turn 65, whether or not you’re still working, and even if you choose to defer your Social Security benefits.
If you take Social Security benefits before 65, you’ll automatically be enrolled in Medicare Part A and Part B on your 65th birthday. However, you will have to specifically enroll in Part D, Medicare Supplement, or Medicare Advantage plans if you want those benefits.

Health Savings Accounts (HSAs) Explained

An HSA is a specific type of savings account that allows you to set aside money tax-free to pay for eligible medical expenses of an eligible individual, their spouse, and their tax dependents. Only those who have a qualified high-deductible health plan (HDHP) and no other disqualifying coverage can contribute to an HSA.

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That means you can’t contribute to an HSA with another type of health insurance plan, including Medicare.

No HSA Contributions with Medicare Enrollment

Once you’re enrolled in Medicare, you are no longer allowed to contribute to an HSA. In fact, you should stop your contributions six months before your Medicare enrollment to avoid penalties. However, if your spouse isn’t yet eligible for Medicare and has an HDHP, they may be able to open their own HSA and continue to contribute, allowing them to save money and help protect themselves from rising health care costs.
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HSA Balance Options in Retirement

Even though you can no longer contribute to an HSA once you enroll in Medicare, your HSA funds are still yours to use. For instance, you can:
  • Pay eligible medical expenses tax-free
  • Pay Medicare premiums for Medicare Part B, Part D, and Medicare Advantage
  • Use for other expenses when you reach 65 (taxes apply)

Important note: There are no joint HSA accounts, but you and your spouse can agree to use funds from either one of your individual accounts, as long as those funds are used for a qualifying purpose.

With quality, trusted information about Medicare, American Fidelity Retirement Services (AFRS) can help you get the best plan for your needs and understand the do’s and don’ts of HSAs during your retirement years. We’re here to help protect what you’ve worked for.

 

This blog is up to date as of March 2025 and has not been updated for changes in the law, administration or current events. 

This information is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.

 

 

Source:

Medicare and HSAs Don’t Mix; December 2024, accessed 1/24/2025