Yes, but you can’t to contribute to a Health Savings Account (HSA) after you enroll in Medicare.
You can use the money you have already accumulated tax-free in the account at any time for eligible medical expenses. After you reach age 65, you can even withdraw money tax-free from an HSA to pay your health insurance premiums.
An HSA is a tax-efficient way to save for out-of-pocket medical expenses. Your contributions are tax deductible. Or, if you participate through your employer, the contributions are deducted before your income tax withholding is calculated.
The money grows tax-deferred in the account. And you can withdraw it tax-free for eligible healthcare expenses in any year.
In 2022, you can contribute to an HSA if you are not enrolled in Medicare and have an HSA-eligible health insurance policy with a deductible of at least $1,400 for yourself or $2,800 for family coverage. This is true whether you obtain the insurance through your employer or on your own.
When should I stop contributing to my HSA?
You can contribute to an HSA for as long as you want if you are not enrolled in Medicare and have an HSA-eligible insurance policy. However, after you enroll in Medicare, you cannot remit any further premiums. And if you’re on Medicare, your employer can’t add to your HSA either.
You must stop contributing to an HSA starting the first month you enroll in Medicare Part A or Part B, even if you also have a high-deductible policy through work. If you enroll in Medicare mid-year, you may be able to make prorated premiums based on the number of months you had a qualifying health insurance policy before your health insurance started. .
For example, if your Medicare coverage began on July 1, you can contribute half of the year’s contribution to the HSA. If you are 55 or older in 2022, the full year premium is $4,650 for single coverage or $8,300 for family coverage. In this case, you can contribute up to $2,325 for the year if you had single coverage or $4,150 for family coverage. You have until the tax filing deadline of April 15, 2023 to contribute for 2022.
What expenses are tax exempt once I’m on Medicare?
At any age you can withdraw HSA money tax-free to pay for your health insurance deductibles, co-payments, dental care, hearing care, prescription and over-the-counter medications, vision needs, and other eligible health care expenses not covered by insurance.
You can also withdraw tax-free money from an HSA to pay a portion of eligible long-term care insurance premiums based on your age. You can withdraw up to $4,510 for long-term care premiums in 2022 if you’re between 61 and 70 and $5,640 if you’re over 70. Your spouse can also withdraw up to this amount, depending on their age. Eligible withdrawal limits for long-term care premiums are smaller at younger ages.
After reaching age 65, you can also withdraw tax-free money from your HSA to pay premiums for Medicare Part B, Part D prescription drug coverage, and Medicare Advantage plans, but not Medicare supplemental plans, also known as Medigap. You can also pay your Part A premiums with HSA money if you or your spouse haven’t worked long enough to qualify for premium-free Part A coverage.
If your premiums are paid directly from your Social Security benefits, you can withdraw tax-free money from your HSA to reimburse yourself for these expenses. Don’t forget to keep a cost record.
Before age 65, If you use HSA money for non-medical expenses, you will have to pay taxes and a 20% penalty on withdrawals. The penalty disappears at age 65, but you’ll still have to pay taxes on withdrawals that aren’t for eligible medical expenses. So, to avoid the tax bill, look for eligible expenses, such as Medicare premiums, when making withdrawals to avoid the tax bill.
keep in mind
You can have a deadline later. Some people who are still working at age 65 for an employer with 20 or more employees choose to delay enrolling in Medicare Part A and Part B so that they can continue contributing to an HSA. But when you leave that job, you’ll have to enroll in Medicare within eight months of losing your health insurance or face late enrollment penalties when you enroll in Part B.
If you work for a small employer, with less than 20 employees, you generally must enroll in Medicare at age 65 because Medicare usually becomes primary coverage and employer coverage is secondary. If you don’t enroll in Medicare, you could have big coverage gaps.
Do you already receive Social Security? If you receive Social Security benefits, you are automatically enrolled in Part A and you do not have the option to delay.
Another caveat: If you enroll in Part A after the month you turn 65, your Part A coverage can start up to six months retroactively, but not before the month of your birthday. Keep this retroactive coverage date in mind when calculating how much you can contribute to the CGS for the first year.
In the example above, if you enroll in Medicare July 1 and your Part A coverage begins January 1, you cannot make HSA contributions for the year.