HSAs and Medicare: when to stop contributing

A Health Savings Account (HSA) lets you save money tax-free for health costs. Once you're enrolled in Medicare, you can't put more money in, but you can keep using what's there.

No contributions once Medicare starts

Starting with the first month you're enrolled in Medicare, your HSA contribution limit is zero. That includes money your employer puts in. In the year your Medicare starts, your yearly limit is cut back for the months you had Medicare.

Part A can start 6 months early

If you sign up for premium-free Part A after you turn 65, or apply for Social Security benefits then, your Part A coverage starts up to 6 months before the month you apply, but never earlier than the month you turned 65. HSA contributions made for those months count as excess contributions and can cost you tax. Applying for Social Security benefits also signs you up for Part A, and you generally can't drop premium-free Part A.

Medicare's advice is to stop contributions, yours and your employer's, at least 6 months before you apply. In practice:

• Signing up 6 or more months after you turn 65: don't contribute for the 6 months before the month you apply, or any month after.
• Signing up less than 6 months after you turn 65: don't contribute for the month you turn 65 or any month after.

Using your HSA after 65

• You can pay Medicare premiums from your HSA tax-free, for example Part B, Part D or a Medicare Advantage plan, but not Medigap premiums.
• You can keep paying deductibles, copays and other qualified medical costs tax-free.
• After 65 you can also take money out for anything else. It's taxed as income, but there's no extra 20% tax.

If you're still working

If you have health coverage through your own or your spouse's current job, you may be able to put off Medicare without a penalty and keep contributing. Check with the employer's benefits office first: the rules depend on the employer's size. See leaving job-based coverage for how to sign up later without a penalty.