What Happens to HSA When You Go on Medicare?

When you go on Medicare, the way you use your Health Savings Account (HSA) may change. Medicare eligibility usually marks a significant transition in your healthcare coverage, and it's important to understand how it impacts your HSA.

Here's what happens to your HSA when you go on Medicare:

• No new contributions: Once you enroll in Medicare, you can no longer contribute to your HSA. This is because Medicare is a form of insurance, and you cannot contribute to an HSA when you have any other form of insurance besides a high-deductible health plan (HDHP).
• Use for qualified medical expenses: Even though you can't contribute to your HSA once on Medicare, you can still use the funds in your account to pay for qualified medical expenses tax-free. These expenses include deductibles, copayments, coinsurance, and certain other healthcare costs.
• Penalty-free withdrawals after age 65: Once you turn 65, you can make penalty-free withdrawals from your HSA for any reason. However, if the withdrawals are not used for qualified medical expenses, they will be taxed as regular income.
• Medicare premiums: You can use HSA funds to pay for Medicare premiums, but not for supplemental coverage like Medigap or Medicare Advantage plans.
• Coordination with Medicare: It's essential to coordinate the use of your HSA with Medicare to avoid any penalties or tax issues. Consulting a financial advisor or tax professional can help you navigate this process smoothly.

When you enroll in Medicare, understanding the implications for your Health Savings Account (HSA) is crucial. It's a pivotal moment in your healthcare journey and knowing the rules can maximize the benefits of your HSA.