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How your health savings account works with Medicare

Medicare and your HSA can work well together — when you know what you can and can’t do with each of them. Learn how to maximize the benefits of both.

If you have a high deductible health plan (HDHP), you may also be eligible to get a health savings account, or HSA. That’s a type of health account that lets you set aside money on a pretax basis to pay for certain eligible medical expenses. By using pretax dollars, you’re actually spending less money on health care.

But as you approach your 65th birthday and get ready to enroll in Medicare, the rules having to do with your HSA can change. Here’s what you want to know about managing your HSA while you’re on Medicare.

Need help enrolling in Medicare? Contact a licensed insurance agent at 1-844-211-7730.

Can I continue contributing to my HSA after I enroll in Medicare?

Regardless of which Medicare plan you choose, here’s some good news: You can continue spending the pretax dollars from your HSA. However, there’s a catch. You have to stop contributing to your HSA 6 months before your Medicare start date, says Scott Maibor, a Medicare adviser at Senior Benefits Boston. That includes any contributions made by your employer, as well as your own contributions, he adds.

Note: This is only true if you enroll in Medicare when you are more than 6 months past being 65. That is, during the next Open Enrollment Period — after your initial enrollment period — if you planned to retire after 65 or were eligible for a Special Enrollment Period because you lost your employer-sponsored plan after you turned 65.

What happens if I continue contributing to my HSA after I’m enrolled in Medicare?

It’s not recommended that you continue to add money to your account. You could incur IRA penalties that may include payment of back taxes on your tax-free contributions and any account interest, says Adria Gross, president of MedWise Insurance Advocacy in Monroe, New York. You may also have to pay excise taxes and additional income taxes. (An excise tax is one that’s imposed on certain goods, services and activities.)

You’re only eligible to contribute to your HSA for the portion of the year that you’re not covered by Medicare. To calculate your contribution amount to your HSA during your calendar year of retirement, you need to go back 6 months from the month you apply. That is when you need to stop contributing.

For example: If you apply during September so you can retire and begin getting benefits on October 1, you’ll be considered enrolled in Medicare Part A starting in March — 6 months before September. If you use 2023 contribution limits, the maximum you will be able to contribute to your HSA is $808.

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Can I defer my Medicare enrollment so that I can continue contributing to my HSA?

You can continue to contribute to your HSA if you’re still covered by employer insurance and not enrolled in any part of Medicare, including A, B, C or D. But once you turn 65, you are immediately eligible for Medicare.

If you want to continue your employer coverage and delay being enrolled, talk to your human resources office. If your current health plan does not qualify, penalties may apply if you delay enrollment once you turn 65. You also can’t delay getting Medicare Part A when you turn 65 if you are also receiving social security.

What can I pay for with my HSA funds?

Your HSA can be spent on many items. While you can no longer make contributions to your HSA once you enroll in Medicare, the money can stay in your account and keep growing in value, says Maibor. Just as you were doing before getting Medicare, you can use the money from your HSA for eligible medical expenses, including:

  • Certain home improvements to make your house more accessible, such as installing entrance and exit ramps, widening doorways, and installing railings and support bars (on stairs or in the shower)
  • Complementary therapies, such as acupuncture
  • Hearing aids and batteries
  • Medicare copayments
  • Medicare deductibles
  • Transportation for medical care
  • Vision and dental expenses
  • Walkers and wheelchairs

You can find a list of eligible expenses on the IRS website.

What can’t I pay for with my HSA funds?

There are some health care–related services you can’t use an HSA to pay for. They include:

  • Cosmetic or plastic surgery
  • Gym memberships
  • Household help
  • Nutritional supplements
  • Personal use items such as toothbrushes and toothpaste
  • Teeth whitening
  • Veterinarian bills (unless your dog is a certified assistance animal)

What happens if I use my HSA funds to pay for a nonqualified expense?

Technically, you can use the money in your HSA account on anything you want, but it may cost you. If you aren’t spending it on a qualified medical expense, it will be taxed as income at your current tax rate.

If you’re under the age of 65 and want to use HSA money for nonqualified expenses, be prepared for a big penalty. “Prior to age 65, if you use your money for nonqualified expenses, the IRS imposes a large HSA withdrawal penalty of 20% on the amount withdrawn,” says Gross. That means if you spend $1,000 on nonqualified expenses, your penalty will be $200.

Once you hit 65, though, you can spend your HSA funds on anything — rent, car payments, a boat — without the extra penalty. But you will still have to pay state and federal taxes.

The combination of your HSA and Medicare can be a tricky one. That’s why it’s always a smart move to consult a licensed insurance agent. Call one at 1-844-211-7730 to discuss your options.


Centers for Medicare & Medicaid Services: “5 things you need to know about signing up for Medicare.” Accessed July 11, 2023. “High Deductible Health Plans (HDHPs) & Health Savings Accounts (HSAs): Finding & using HSA-eligible HDHPs.” Accessed July 11, 2023. “High Deductible Health Plans (HDHPs) & Health Savings Accounts (HSAs): How HSAs work with HDHPs.” Accessed June 8, 2023.

Internal Revenue Service: “Publication 502 (2022), Medical and Dental Expenses.” Accessed July 11, 2023.

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