Medicare and Health Savings Accounts

Keys to navigating tricky HSA situations for Medicare-entitled individuals

Preparing for retirement |
Mature couple drinking coffee outside on a fall morning

Health Savings Accounts (HSAs) are tax-favored programs that can come with High-Deductible Health Plans (HDHPs) offered by employers. While these can be a great asset for employees during and beyond retirement, they can create some tricky situations for Medicare-entitled individuals. Here’s what you need to know:

The basics

  • The IRS states that you cannot contribute to an HSA while entitled to any part of Medicare, including premium-free Part A.
  • In the year you become entitled to Medicare, you must prorate the amount you contribute to your HSA funds.
    • So, someone who is permitted to make contributions from January-April can contribute 4/12 of the annual limit (see below for contribution limit information).
  • When you enroll in Medicare during your Initial Enrollment Period (at age 65), you typically become entitled to Medicare on the first day of your 65th birthday month.
  • Both employee and employer contributions must cease.
  • These rules apply to the HSA account holder only, not their spouse.

Using an HSA while enrolled in Medicare

  • While you can no longer contribute to your HSA once enrolled in Medicare, you can still access the funds for qualified medical expenses.
  • For many individuals on Medicare, HSAs are used for:
    • Dental, vision, and hearing costs that are not covered under Medicare.
    • Reimbursement for Medicare Part B and/or Part D premiums.
    • Copays or coinsurances for medications.
  • HSA funds cannot be used for Medicare supplement premiums.

Contribution limit information

  • The type of HDHP dictates the HSA contribution limit, regardless of if a spouse is on Medicare.
    • The 2025 family contribution limit is $8,550.
    • The 2025 single contribution limit is $4,300.
  • Individuals aged 55 and older can contribute an additional $1,000 catch-up contribution.
  • The amount you contribute is more important than when you contribute.
    • You cannot simply fully fund your HSA prior to your Medicare entitlement date.

Specific scenarios

An individual in a self-only HDHP enrolling in Medicare at age 65:

  • You can contribute to your HSA up until the month you turn 65.
  • You must prorate the amount you contribute based on your 65th birthday month.
    • Example: If your Medicare becomes effective Oct. 1 (the month you turn 65), you can contribute 9/12 of the annual contribution limit.
      • In 2025, that would be 5,300 x 9/12 = $3,975 (includes the $1,000 catch up contribution)

An individual in a family HDHP enrolling Medicare at age 65:

  • You can contribute to your HSA up until the month you turn 65.
  • You must prorate the amount you contribute based on your 65th birthday month.
    • Example: If your Medicare becomes effective Oct. 1 (the month you turn 65), you can contribute 9/12 of the annual contribution limit.
      • In 2025, that would be $9,550 x 9/12 = $7,162.50

An individual in a family HDHP, whose spouse is enrolling in Medicare at age 65:

  • You can contribute the full family contribution limit if your spouse remains on the family HDHP.
  • If your spouse drops your HDHP when enrolling in Medicare, you must prorate your contribution amounts based on HDHP type.
    • Example: If your spouse’s Medicare becomes effective May 1, you can contribute 4/12 of the family contribution limit and 8/12 of the single contribution limit.
      • $9,550 x 4/12 = $3,183
      • $4,300 x 8/12 = $2,867
      • Total allowable contribution = $6,050 (includes the $1,000 catch up contribution)

Enrolling in Medicare past age 65

  • When enrolling in Medicare past age 65, Medicare Part A can be backdated up to six months. The amount you contribute to your HSA must be based on this backdated Part A date.
  • When you are over age 65, you become entitled to Medicare the month you apply for Medicare.
  • Best practice is to apply for Medicare at least three months prior to your requested effective date.

Individuals/spouses enrolling after age 65:

  • All the scenarios stay the same, but your date of entitlement is based on the month you apply for benefits.
  • You must also include the six-month lookback.
  • Use the chart below to determine how to prorate your HSA contributions.

Medicare supplement HSA