What Happens to My HSA Money After I Go on Medicare?

As you start planning for retirement and healthcare expenses, you may wonder about your Health Savings Account (HSA) and how it will be affected once you enroll in Medicare. Understanding the implications of going on Medicare for your HSA funds is essential to make informed decisions for your future healthcare needs.

When you go on Medicare, there are several things that happen to your HSA money:

• Your HSA contributions must stop once you enroll in Medicare Part A or Part B.
• You can still use the existing funds in your HSA to pay for qualified medical expenses, even after you are on Medicare.
• If you use HSA funds to pay for non-qualified expenses after going on Medicare and are under 65, you will incur a 20% penalty on the amount used for non-qualified expenses.
• Once you turn 65, the 20% penalty no longer applies, but you will still owe income tax on any withdrawals for non-qualified expenses.
• If you have a High Deductible Health Plan (HDHP) while enrolled in Medicare, you can continue contributing to your HSA.
• If you delay enrolling in Medicare and continue working, you can keep contributing to your HSA until you enroll.

It is important to plan ahead and understand the rules regarding HSAs and Medicare to maximize the benefits of your HSA while ensuring you comply with regulations. Consulting a financial advisor or tax professional can help you navigate the complexities of managing your HSA funds after enrolling in Medicare.

As you approach retirement, it's essential to understand how your Health Savings Account (HSA) will be impacted by your transition to Medicare. Knowing the changes can help you prepare better for your healthcare budget.