Seniors have the most expensive health insurance and the most confusing health insurance options. Here are some frequently asked questions regarding Medicare, Social Security, and Health Savings Account (HSA) contributions.

Do I benefit from HSA contributions during my senior years?

Yes. Anyone benefits from HSA contributions and savings. A Health Savings Account (HSA) is a rare type of account where you can get a tax deduction when you put the money in and then pay no tax when you take the money out for qualified medical expenses.

Is there an age limit to HSA contributions? Can I contribute to an HSA while receiving Social Security benefits?

While there is technically no age limit to HSA contributions, current IRS rules have effectively created one. When you sign up for Social Security, the Social Security Administration automatically enrolls you in Medicare Part A. You cannot opt out. Enrolling in any part of Medicare, including Part A, prohibits you from contributing to your HSA.

If you manage to never enroll in Medicare, then you could theoretically contribute to an HSA your entire life. However, basically everyone benefits from enrolling in Medicare promptly during their enrollment period.

When do I have to enroll in Medicare?

To avoid penalties, you must enroll either during an initial enrollment period or a special enrollment period.

The initial enrollment period is from 3 months before to 3 months after your birth month the year you turn age 65. The special enrollment period is an 8-month window starting after your retirement from an employer offering group health insurance.

It is important to note that COBRA and retiree health plans aren’t considered coverage based on current employment. Individuals covered under these types of insurance would do better to enroll in Medicare during their initial enrollment period.

Additionally, some types of job-based insurance may change their benefits after age 65 on the presumption that you will enroll in Medicare. In this case, the coverage of your employer health insurance may insufficiently cover your medical costs .

See “When to Enroll in Medicare” for more information on this.

Can I create a special enrollment period later by getting a job and then leaving it?

To use a special enrollment period, you must have been “continuously covered by either job-based insurance or Medicare Part B since becoming eligible for Medicare .” Continuously is defined as no more than 8 consecutive months without coverage. So while it is theoretically possible that you could time your employment coverage just right, it is impractical.

Can I contribute to an HSA while enrolled in Medicare?

No. Enrolling in any part of Medicare prohibits you from contributing to your HSA. Meanwhile, if your miss your enrollment period for Medicare, then your premiums are hit with a late enrollment penalty. Instead of trying to extend your HSA eligibility, nearly everyone benefits from enrolling in Medicare promptly.

Can I contribute to an HSA while I have other health insurance?

No. The broader rule that prevents HSA contributions while enrolled in Medicare is that you cannot contribute to an HSA if you are enrolled in any health insurance other than the HSA-qualified health insurance.

IRS Publication 969 states this as “If you (and your spouse, if you have family coverage) have HDHP coverage, you can’t generally have any other health coverage.”

What should I keep in mind for my HSA when I’m planning my retirement?

First, the special enrollment period after retirement gives you 8-months after the end of your current employment to enroll.

Second, when you use a special enrollment period to enroll in Medicare Part A after age 65, your coverage is retroactive six months.

Third, the amount you can contribute to your HSA is reduced proportionately to only the number of months in the year during which you were eligible to contribute to the HSA.

This effectively means that if you enroll in Medicare when you retire, you will count as having Medicare coverage six months prior and not be eligible for HSA contributions during those months. If you use COBRA coverage to delay Medicare enrollment as long as possible, the most you could increase your HSA contributions by is two months after your retirement (8 months of COBRA minus 6 month of retroactive coverage). Once you enroll in Medicare, your current year HSA contribution limit will be proportionately reduced by the effective Medicare coverage months.

That being said, any amount of additional HSA contribution, even if it is only one or two months, is likely mathematically advantageous. If you are eligible for the contributions, make them.

Can I contribute to an HSA if my spouse is enrolled in Medicare but I am not?

Yes. IRS Publication 969 makes clear, “You can still be an eligible individual even if your spouse has non-HDHP coverage, provided you aren’t covered by that plan.”

How much can I contribute to an HSA if my HDHP covers both me (not on Medicare) and my spouse (on Medicare)?

If your HDHP is family coverage, you are entitled to the family contribution limit and (if old enough) the catch-up contribution. This is true even if your family coverage covers a Medicare-enrolled spouse. However, you would need to make those HSA contributions to your own HSA because your Medicare-enrolled spouse would not be eligible for either the HSA contribution or catch-up.

Can I withdraw from an HSA while on Medicare?

Yes. The money in the health savings account is owned by you and retains its HSA status even after you are no longer enrolled in the high deductible health insurance plan.

What happens if I mistakenly contribute to my HSA when I’m not eligible to do so?

IRS Publication 969 explains, “Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account.”

Where do I go for help on this topic?

While we strive to provide comprehensive financial advice, we are not Medicare experts. Health insurance advice requires specialized knowledge of local insurance markets and health care providers. Most areas offer free Medicare counseling through a local board of aging, and we typically recommend that clients take advantage of that free expertise to talk over insurance choices.

You may be able to find a Medicare counselor in your area by searching for “medicare health insurance counseling” with the name of your state or county.

Photo by Tatiana Tochilova on Unsplash. Image has been cropped.