Yes, but you can’t contribute to a health savings account (HSA) after enrolling in Medicare.

You can use the tax-free money you already have in your account at any time for eligible medical expenses. After you turn 65, you can even tax-free withdraw money from HSA to pay your Medicare premiums.

An HSA is a tax-friendly way to save on out-of-pocket medical expenses. Your contributions are tax deductible. Or, if you participate through your employer, the contributions are deducted before your withholding tax is calculated.

Money grows tax-deferred in the account. And you can withdraw it without paying taxes on eligible health care costs in any year.

In 2022, you can contribute to HSA if you are not enrolled in Medicare and have an HSA compliant health insurance policy with a deductible of at least $1,400 for you alone or $2,800 for family insurance. This is true whether you get insurance through your employer or on your own.

When should I stop making HSA contributions?

You can contribute as much as you want to the HSA if you are not enrolled in Medicare and do not have an HSA compliant insurance policy. However, once you enroll in Medicare, you will not be able to make new contributions. And if you’re on Medicare, your employer can’t add to your HSA either.

You must stop making HSA contributions from the first month of enrollment in Medicare Part A or Part B, even if you also have a high-deductible work policy. If you enroll in Medicare in the middle of the year, you will be able to make prorated contributions based on the number of months you had a valid health insurance policy before your Medicare program took effect.

For example, if your Medicare coverage started on July 1, you can make a six-month premium to HSA. If you turn 55 or older in 2022, the full year premium will be $4,650 for individual insurance or $8,300 for family insurance. In this case, you can contribute up to $2,325 per year if you had single insurance or $4,150 if you had family insurance. You have until the April 15, 2023 tax filing deadline to make your 2022 contribution.

What expenses are tax-deductible after I become a Medicare member?

Any age You can withdraw HSA tax-free money to pay for health insurance deductibles, copayments, dental services, hearing care, prescription and over-the-counter drugs, eye conditions, and other qualifying medical expenses that are not covered by insurance.

You can also withdraw money from HSA duty-free to pay a portion of qualifying long-term care premiums based on your age. In 2022, you can withdraw up to $4,510 in long-term care premiums if you are between 61 and 70 and $5,640 if you are over 70. Your spouse may also withdraw up to this amount depending on his or her age. Acceptable withdrawal limits for long-term care premiums are lower at younger ages.

After you turn 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 supplementary plans, also called Medigap. You can also pay your Part A premiums from HSA if you or your spouse have not worked long enough to qualify for 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 help you recoup these costs. Just remember to keep track of expenses.

Up to 65 years old if you use HSA money for non-medical expenses, you will have to pay taxes and a 20 percent penalty on withdrawals. The penalty disappears at age 65, but you still have to pay taxes on withdrawals that are not eligible medical expenses. So, to avoid a tax bill, look for qualifying expenses, such as Medicare premiums, when withdrawing funds to avoid a tax bill.

Keep in mind

You may have a deadline later. Some people who are still working at age 65 for an employer with 20 or more employees choose to defer Medicare Part A and Part B enrollment so they can continue to contribute to the HSA. But when you leave this job, you will need to enroll in Medicare within eight months of losing your health coverage or you will have to pay a late enrollment penalty when you sign up for Part B.

If you work for a small employer, with fewer than 20 employees, you usually have to enroll in Medicare at age 65 because Medicare usually becomes the primary coverage and the employer’s coverage is secondary. If you don’t enroll in Medicare, you may have large coverage gaps.

Already on Social Security? If you receive Social Security benefits, you are automatically enrolled in Part A and you do not have the option to defer your benefits.

One more caveat: If you enroll in Part A after you turn 65, your Part A coverage may retroactively begin up to six months, but not before the month of your birthday. Keep this retroactive coverage date in mind when calculating how much you can contribute to HSA for the first year.

In the example above, if you enroll in Medicare on July 1 and your Part A coverage starts on January 1, you will not be able to make HSA contributions for a year.

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