How can a health savings account help me pay for Medicare expenses?

HSA and piggy bank

Many of our clients come to us with existing health savings accounts, or HSAs, with little to no idea how these existing funds can be used or what is allowed surrounding their move to a Medicare health plan. Whether you currently have an HSA you’re contributing to, or you’re unsure what happens as you transition to Medicare, we’ve covered all the details you need to know below.

What is a health savings account?

A health savings account, also known as an HSA is an account you put money into to pay your medical expenses with triple tax free dollars. This solution means if you reach specific requirements, you can contribute money before you pay tax if you meet the eligibility requirements. For most people, this means being in a high-deductible health plan. Many people have HSAs through the health plan they have with their employer.

How does Medicare affect my HSA?

Medicare is an additional health plan. In effect, this addition means that you’re no longer eligible to contribute tax free money to your HSA. For most people, transitioning from a high deductible health plan with a HSA to Medicare is a part of the retirement process. The HSA is no longer used as a place to deposit funds and instead serves as a way to fund certain things as you move to Medicare.

How can a health savings account help me pay Medicare expenses?

While you can’t deposit funds into your HSA after enrolling in either part of Medicare, you can withdraw money that remains in your HSA to help cover various expenses. For example, the money you have available in your health savings account could be used to pay for:

  • Deductibles
  • Co-payments
  • Dental care
  • Hearing care
  • Prescriptions
  • Over-the-counter medications
  • Vision care
  • Other eligible healthcare expenses

Alongside this, you can also choose to withdraw money from your HSA tax-free to cover eligible long-term care insurance premiums. These range from $4,510 in 2022 from the ages of 61-70, and $5,640 for any age above that number.

Finally, if you’re over 65, you can withdraw money within your health savings account tax-free to cover several eligible Medicare premiums, including Medicare Advantage plans and Medicare Part B, and Part D prescription drug coverage. Depending on your circumstances, Part A premiums may also be covered, though Medicare supplemental plans are not included.

Is there anything I need to know about HSAs?

It’s important to understand that once you’ve transitioned to Medicare, you’ll be unable to use your health savings account as you once did by depositing tax-free funds. It’s also essential to have a solid plan for your transition into retirement, to ensure you have the coverage you want and a full understanding of how your medical insurance will change. Our knowledgeable team is on hand to help you make the transition with security, insight, and peace of mind. Get in touch with us on [phone] or fill out our contact form to learn more.

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