HSA & Medicare: What You Need to Know Before Turning 65

You’ve diligently saved in your Health Savings Account (HSA), anticipating a comfortable retirement. But as you approach 65, uncertainty looms: How does enrolling in Medicare affect your HSA?

At Mere, we understand the confusion surrounding HSAs and Medicare. We're here to provide clarity, ensuring you make informed decisions about your healthcare finances.

The Intersection of HSAs and Medicare

HSAs offer triple tax advantages: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. However, the rules change once Medicare enters the picture.

When Must You Stop HSA Contributions?

• Enrollment in any part of Medicare (A, B, or D) disqualifies you from making further HSA contributions. This includes automatic enrollment in Part A when you start receiving Social Security benefits at 65 .
  

• Retroactive Coverage Alert: If you enroll in Medicare after 65, Part A coverage may be backdated up to six months. To avoid excess contributions and potential penalties, cease HSA contributions at least six months before enrolling in Medicare .
  

Utilizing Your HSA Post-Medicare Enrollment

While contributions must stop, your HSA remains a valuable resource:

• Qualified Expenses: Use HSA funds tax-free for Medicare premiums (excluding Medigap), deductibles, copayments, and coinsurance .
  
  

• Long-Term Care: Pay for qualified long-term care services and insurance premiums up to IRS limits .
  
  

• Non-Medical Withdrawals: After 65, withdraw funds for non-medical expenses without penalties, though these will be subject to income tax.

Strategic Planning Tips

• Delay Medicare Enrollment: If you have credible coverage through an employer with 20 or more employees, consider delaying Medicare to continue HSA contributions .
  
  

• Maximize Contributions: Before enrolling in Medicare, contribute the maximum allowed to your HSA, including catch-up contributions if you're 55 or older.
  
  

• Coordinate with Spouse: If your spouse is under 65 and not enrolled in Medicare, they can continue contributing to their own HSA .

Navigating HSA and Medicare Transitions with Confidence

Understanding the nuances of HSAs and Medicare is crucial for optimizing your healthcare finances. At Mere, we're committed to guiding you through these transitions, ensuring your retirement is as stress-free as possible.

Call or text (904) 654-5450 or visit www.merebenefits.com to schedule a personalized consultation.

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FAQs: HSA and Medicare

Can I use my HSA to pay for Medicare premiums?

Yes, you can use HSA funds tax-free to pay for Medicare Parts A, B, C (Medicare Advantage), and D premiums. However, you cannot use HSA funds to pay for Medigap (Medicare Supplement) premiums.

What happens if I contribute to my HSA after enrolling in Medicare?

Any contributions made after your Medicare effective date are considered excess contributions and are subject to a 6% IRS penalty each year until corrected. If this happens, you’ll need to remove the excess funds and any earnings on those funds before filing your taxes.

Can I delay Medicare to keep contributing to my HSA?

Yes—if you're actively working and have creditable coverage through an employer plan (with 20+ employees), you can delay Medicare without penalty and continue HSA contributions. However, once you apply for Medicare (even just Part A), you must stop contributing—and Medicare Part A may retroactively apply up to 6 months, so you’ll want to stop contributions early to avoid penalties.

What can I use my HSA for after I retire and stop contributing?

You can use HSA funds tax-free for:

• Medicare premiums (Parts A, B, C, D)

• Out-of-pocket costs (deductibles, copays)

• Dental, vision, and hearing expenses

• Qualified long-term care services and premiums (up to IRS limits)

• Non-medical expenses (after age 65, withdrawals are taxed but not penalized)

Can my spouse keep contributing to an HSA if I’m on Medicare?
Yes! If your spouse is under age 65, not enrolled in Medicare, and covered under a qualifying high-deductible health plan, they can open and contribute to their own HSA even if you’re enrolled in Medicare.

What if I enrolled in Medicare without realizing I had to stop HSA contributions?

This happens often. You’ll need to calculate and remove excess contributions made after your Medicare effective date and file IRS Form 5329 to avoid ongoing penalties. Our team can refer you to a tax professional if needed.