Retirement

Can You Pay Medicare Premiums From Your HSA?

There seems to be a lot of confusion about whether you can pay your Medicare premiums from your health savings account (HSA). Technically, you cannot pay your Medicare premiums from your HSA. But yes, you can use your HSA funds to pay your Medicare premiums. Keep reading as we explain.

Can You Pay Medicare Premiums With Health Savings Account Funds?

Most people will find that their Medicare premiums are deducted from their Social Security checks. Even if this is true, you can still reimburse yourself for premiums paid from your health savings account.

Once you’ve turned 65 and enrolled in Medicare, you can use HSA money tax-free to pay premiums for Medicare Part B and D. Medicare Advantage plans are also eligible for reimbursement. However, premiums for Medicare supplement policies are not eligible to be reimbursed tax-free from a health savings account.

Can You Contribute To An HSA When On Medicare?

There are no Medicare plans that qualify as HSA-eligible. That means you will no longer be eligible to make further contributions to your HSA once you are on Medicare. That being said, you will still be able to have an HSA, either earning interest or being invested.

From there, you can reimburse yourself for the numerous medical bills you will continue to face in retirement. Even if you are the healthiest retiree, routine testing and medical visits can still add up.

Is There An HSA Withdrawal Deadline?

One of the biggest advantages of an HSA is there is no deadline for when you need to withdraw money from your account. You can keep the money growing in your account and reimburse yourself well into the future.

For example, even if you were in your 20s or 30s today, you could invest and grow your HSA account balance for decades. From there, you could use your funds to reimburse yourself for expenses incurred between now and retirement. Or you could wait and then use your Health Savings account to reimburse yourself for Medicare expenses (way in the future) once you retire.

Best Reasons To Use A Health Savings Account

The best reason to use a health savings account is the tax savings. Your HSA funds are triple tax advantages. 1) If you make contributions via payroll, you won’t be subject to Social Security Medicare or income taxes. 2) Your investment within your HSA can grow tax-free. 3) Your funds can be withdrawn tax-free when used for medical expenses (or, as mentioned above, Medicare Premiums). Who doesn’t love tax-free income?

2024 Health Savings Account Limits

HSA contribution limits have increased for 2024. The new 2024 HSA contribution limit is $4,150 if you are single—a 7.8% increase from the maximum contribution limit of $3,850 in 2023. The 2024 HSA contribution limit for families is $8,300, a 7.1% increase from the 2023 limit of $7,750.

For HSA users 55 and older, you can contribute an extra $1,000 to your HSAs. This amount will remain unchanged in 2024.

HSA Eligible Expenses

A wide variety of things could be considered qualifying expenses for HSA reimbursement. Some are obvious, like medical copays, dental cleanings, prescriptions, and fun stuff like colonoscopies. Others are less obvious, like over-the-counter drugs or even sleep aids. Surprisingly, you can’t pay health insurance premiums with HSA funds. The exception to this is that Medicare premiums are eligible for HSA reimbursement.

With the cost of healthcare skyrocketing for retirees and the triple tax advantages, you may want to use your health savings account as a de facto retirement account. Talk with your tax-planning-focused financial planner about how to maximize your benefits from an HSA.

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