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People who have HSA plans are often confused about whether to enroll in Medicare at age 65. The IRS, however, does not allow you to continue contributing into an HSA plan when you are enrolled in any part of Medicare, so in this sense HSA and Medicare do not go together.
However, if you delay enrollment into Medicare, you and/or your employer can continue to contribute into your health savings account. Just be sure that you do not enroll into ANY part of Medicare and also do not enroll into SS income benefits because this automatically triggers Part A. You cannot have one without the other.
Where HSA plans do go well with Medicare is in spending your HSA dollars after you have retired. You can use a special election period to enroll in Medicare Parts A, B an D. The funds you have saved up in your HSA can be used to pay Medicare premiums, deductibles, copays and coinsurance as well as dental, vision and hearing expenses.
HSA plans have many benefits. As an individual with a high-deductible health plan, you get to enjoy premiums that are considerably lower than a regular health insurance plan. However, that’s not the only benefit. When you open the health savings account that goes alongside your health insurance, you now have an opportunity to contribute money into the account tax-free. This means that you pay no income taxes or Social Security/Medicare taxes on that money.
You also pay no taxes on the money when you pull it out for qualified medical expenses, which include dental and vision expenses. You can even use funds in your health savings account to pay for qualified medical expenses of your dependents, whether they are on the health insurance policy with your not.
What’s more is that this money is yours forever. It compounds over time and can grow into a really great nest-egg of money that you can use for medical expenses, including Medicare premiums, during retirement.
With all of these great benefits, it’s easy to see why someone working at age 65 wants to continue contributing into their health savings account as long as possible. You just have to be aware that you can’t keep contributing into that HSA if you enroll in any part of Medicare.
What if you didn’t realize this and have already signed up for Part A and Social Security income benefits? You would need to stop contributing to the health savings account. However, you can use the funds that are already in your health savings account for qualified medical expenses until you exhaust the account.
Do not attempt to cancel Part A that is already in force. It can have dire consequences to your Social Security income benefits. (You cannot cancel Part A after beginning your Social Security benefits. If you do, you’ll have to pay back all of the money you have already received from Social Security.)
Instead, you can just use the funds that were already in the savings account toward Medicare Part A, B and D premiums. Funds can also be used for ordinary approved medical expenses, such as doctor visits, labwork, etc
If you have not yet enrolled in Social Security income benefits, you can withdraw your application for Medicare Part A. Please note that later on whenever you decide to apply for Social Security income benefits, it will automatically trigger your enrollment into Part A retroactively for 6 months.
You’ll need to speak with your accountant about any penalties you may owe for contributing into your HSA over the prior six months. Plan ahead for when you will enroll in Social Security income benefits. Then discontinue contributions into your HSA 6 months before you apply for income benefits and trigger your Part A enrollment.
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