Health Savings Account Rules for Retirees

published 18 June 2009

My wife and I turn 65 this year and will sign up for Medicare. Will we still be able to use the money in our health savings account?

You sure can. Even though you can't contribute to an HSA after you sign up for Medicare, you can keep the account and use the money tax-free for medical expenses. In fact, you can use the money in the HSA for anything after age 65, although you will owe taxes on any withdrawals you make for nonmedical expenses.

There are plenty of medical expenses to which you can apply the money. For example, you can tap the account for Medicare deductibles and co-payments. You may also be able to use HSA money to cover premiums for Medicare parts A, B and D (prescription-drug coverage), and to pay Medicare Advantage plan premiums. You may also use HSA money to help pay qualified long-term-care premiums. However, you can't use HSA money tax-free to pay medigap premiums.

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Ask Kim

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.