Getting older doesn’t just mean more experience and wisdom. It also means more opportunity to grow your money—and save for retirement.
That’s where a Health Savings Account (HSA) can make a huge difference. An HSA is a tax-advantaged account that lets you save for qualified medical expenses. But it’s also a powerful retirement savings tool.
Here’s what you need to know about HSAs, Medicare, and retirement savings.
Retirement savings: HSA triple-tax advantage
An HSA offers a triple-tax advantage that makes it one of the most powerful savings tools available:
- Tax-deductible contributions — Your contributions reduce your taxable income.
- Tax-free growth — Any interest or investment gains grow tax-free.
- Tax-free withdrawals — Withdrawals for qualified medical expenses are tax-free at any age.
That’s why many financial experts recommend that people consider investing the money in their HSA for long-term growth.
Members 55+: $1,000 HSA catch-up contributions
If you’re 55 or older, you can contribute an extra $1,000 per year to your HSA on top of the standard HSA contribution limits. This catch-up contribution can help you build an even bigger healthcare nest egg as you approach retirement.
To be eligible for HSA contributions (including catch-up contributions), you must be enrolled in a high-deductible health plan and not be enrolled in Medicare.
Members 65+: Rules for HSAs and Medicare
Once you enroll in any part of Medicare (Part A, Part B, etc.), you can no longer contribute to your HSA. However, you can still use the money already in your HSA.
If you’re still working at 65 and have not enrolled in Medicare, you may continue to contribute to your HSA as long as you remain on a qualifying high-deductible health plan.
Keep in mind: If you sign up for Social Security benefits at age 65 or later, you will be automatically enrolled in Medicare Part A, and your HSA contribution eligibility will end.
Members 65+: Rules for HSA spending
After age 65, you can use your HSA funds for any expense — not just qualified medical expenses. If you use the funds for non-medical expenses, you’ll pay income tax on the withdrawal but won’t face the 20% penalty that applies before age 65.
HSA funds used for qualified medical expenses remain tax-free at any age, including:
- Medicare Part B premiums
- Medicare Part D (prescription drug) premiums
- Medicare Advantage (Part C) premiums
- Long-term care insurance premiums (up to age-based limits)
- Deductibles, copays, and coinsurance
- Dental and vision expenses not covered by Medicare
Note: Medicare Supplement (Medigap) premiums are NOT eligible HSA expenses.
