Health Savings Accounts (HSAs) are great, and they’re growing in popularity every single year. But a lot of people are working past age 65 nowadays, and some choose to sign up for their HSA-qualified employer-sponsored health plan even though they have Medicare. So can you have both Medicare and an HSA or do you lose your HSA funds when you turn 65?
The short answer is that having either Medicare A or B will disqualify you from contributing to an HSA. However, if you have HSA money, it’s yours to keep, and even after you have Medicare you can continue to spend your HSA money on qualified expenses; you just can’t put more money into the account.
Here are a few bullet points from the Medicare website:
- You can no longer contribute to a HSA if you have Medicare.
- You should stop contributing to it at least 6 months prior to applying for Medicare.
- You can withdraw money from your HSA after you enroll in Medicare to help pay for medical expenses (like deductibles, premiums, or copayments).
- If you contribute to your HSA after you have Medicare, you could be subject to a tax penalty by the IRS.
It is worth noting, though, that if you’ve signed up for your group health plan so that you can continue to cover a spouse who’s not yet 65, he or she may still be able to contribute to a Health Savings Account. Your spouse is not an employee and would not be able to accept any employer contribution to the HSA, and any deposits would need to be made after-tax (instead of automatically deducting the money from your paycheck) with a deduction taken when you file your taxes.
Here’s the really fun part, though. Because you have a family health plan (an HSA-qualified plan covering more than one person), your spouse can contribute the full family maximum ($6,650 in 2015 and $6,750 in 2016). And if your spouse is over the age of 55, he or she is also eligible to contribute an additional $1,000 in catch-up contributions. Finally, your spouse can even use his or her HSA funds on your eligible medical expenses. What a deal!