Yes, but the rules change once you turn 65

You can have a health savings account (HSA) after you retire, but what you can do with it depends on your age and whether you're still enrolled in a high-deductible health plan (HDHP). If you're under 65 and retired, you can keep contributing to an HSA as long as you stay on an HDHP — your employment status doesn't matter. Once you turn 65, you can no longer contribute, but you can still withdraw money for may have access to medical expenses without penalty. If you withdraw for non-medical reasons after 65, you'll pay income tax on the withdrawal, but no additional penalty.

The key difference is that retirement doesn't automatically close your HSA. Many people think it does, but the account itself has no retirement date. What changes is your ability to add new money and the tax treatment of withdrawals.

Key Takeaways

  • You can keep an HSA after retirement if you remain on a high-deductible health plan, and you can withdraw money for medical expenses at any age without penalty.
  • Once you turn 65, you stop being able to contribute new money to an HSA, even if you're still on an HDHP.
  • After 65, non-medical withdrawals are taxed as income but no longer face the 20 percent penalty that applies before retirement.
  • If you switch to Medicare at 65, you become ineligible to contribute to an HSA, though you can still spend what's already there on medical costs.
  • The HSA can function as a retirement savings tool if you don't touch it during your working years — money rolls over indefinitely and grows tax-free.

How retirement age affects your HSA contributions

The moment you turn 65, the IRS stops allowing you to put new money into an HSA. This is a hard rule, regardless of whether you're still working or still on an HDHP. If you're self-employed and retired but still carrying an HDHP, you still cannot contribute after 65.

Before 65, retirement doesn't change anything. If you retire at 55 and keep yourself on an HDHP through the individual market or a spouse's plan, you can continue making HSA contributions at the same annual limits as anyone else. The account doesn't know or care whether you're receiving a paycheck.

The contribution limit for 2024 is $4,150 for individual coverage and $8,300 for family coverage (these amounts change yearly). If you retire mid-year, you can still contribute for the months you were covered by an HDHP, prorated if necessary.

What happens to your HSA when you enroll in Medicare

Medicare enrollment at 65 creates a separate problem: once you're on Medicare, you're no longer may be able to access to contribute to an HSA, even if you also keep an HDHP. Medicare is considered "other health coverage" by the IRS, and having it disqualifies you from HSA contributions. This applies to Part A, Part B, or both.

You can delay Medicare enrollment to keep contributing to an HSA, but this is rarely practical because Medicare penalties apply if you enroll late. Most people turn 65 and enroll in Medicare, which ends their ability to contribute.

The good news: you can still withdraw from your existing HSA balance for any may have access to medical expense, including Medicare premiums, deductibles, copays, and coinsurance. You cannot use HSA funds to pay Medicare premiums themselves (Part B or Part D premiums), but you can use them for out-of-pocket costs that Medicare doesn't cover.

Tax treatment of HSA withdrawals after 65

Before you turn 65, any withdrawal from your HSA that isn't for a may have access to medical expense costs you income tax plus a 20 percent penalty. After 65, the penalty disappears. You still owe income tax on non-medical withdrawals, but that's it.

This is actually one reason financial planners sometimes recommend letting an HSA grow untouched during your working years. If you have $50,000 in the account at 65 and you withdraw $10,000 for a non-medical reason, you pay income tax on that $10,000 but no penalty. Before 65, you would have paid income tax plus $2,000 in penalties.

Medical withdrawals at any age — before or after 65 — are tax-free and penalty-free. The IRS definition of may have access to medical expenses is broad and includes dental work, vision care, hearing aids, prescriptions, and many over-the-counter items. Keep receipts, because the IRS can ask for proof years later.

Keeping your HSA active during retirement

Your HSA doesn't require you to do anything to stay open. There's no annual fee to maintain it, and you don't have to make withdrawals or contributions. Money in the account rolls over year to year indefinitely — there's no "use it or lose it" rule like a flexible spending account (FSA).

Some HSA custodians (the banks or investment firms that hold the account) charge a monthly maintenance fee if your balance falls below a certain threshold, often $1,000 or $2,500. Check your account documents or call your provider to see if this applies to you. If it does and your balance is low, you might consider rolling the account to a provider with no minimum balance requirement.

You can invest HSA funds in stocks, bonds, or mutual funds, just like a brokerage account. If you're retired and not touching the money, investing it can help it grow to cover larger medical expenses later. Some people use their HSA as a supplemental retirement account for this reason.

Withdrawing from your HSA in retirement

Once you retire, you can withdraw money from your HSA whenever you need it for a may have access to medical expense. There's no age limit on withdrawals for medical costs — you can withdraw at 70, 80, or 95 without penalty or tax, as long as the money goes toward may be able to access expenses.

Common retirement medical expenses covered by HSA funds include long-term care insurance premiums (up to certain limits), nursing home costs, home health care, and prescription drugs. Cosmetic procedures are not covered unless they're medically necessary (for example, reconstructive surgery after an accident).

Keep documentation of what you spent the money on. The IRS doesn't require you to submit receipts when you withdraw, but you must keep them for your records. If the IRS audits you, they can ask for proof that withdrawals were for may have access to expenses.

Inherited HSAs and what happens after death

If you pass away with money still in your HSA, what happens to it depends on who you named as beneficiary. If your spouse is the beneficiary, they can treat the HSA as their own and continue using it under the same rules. If a non-spouse is the beneficiary, they receive the balance as a lump sum and must pay income tax on it (though not the 20 percent penalty, since they're not the account holder).

This is another reason some people let their HSA grow during retirement — it can become part of their estate. Unlike a regular savings account, the balance can grow tax-free for decades if you don't touch it.

Frequently Asked Questions

Can I open a new HSA after I retire?

Only if you're under 65 and enrolled in an HDHP. Once you turn 65, you cannot open a new HSA or contribute to an existing one. If you're retired but under 65 and still on an HDHP, you can open an HSA at any time.

What if I retire before 65 and don't have health insurance?

You cannot contribute to an HSA without an HDHP. If you retire and drop coverage, your HSA contributions stop immediately. You can still withdraw from the account for medical expenses, but you cannot add new money until you re-enroll in an HDHP.

Can I use my HSA to pay for my spouse's medical expenses?

Yes. HSA funds can be used for may have access to medical expenses of you, your spouse, and your dependents, regardless of whose name is on the account. The money doesn't have to be spent on the account holder.

What if I made HSA contributions and then turned 65 in the same year?

You can contribute to an HSA for any month in which you're under 65 and covered by an HDHP. If you turn 65 in June, you can contribute for January through May. You cannot contribute for June onward. Some providers allow a grace period, but the IRS rule is strict about the month you turn 65.

Is there a way to keep contributing to an HSA after 65?

No. The IRS rule is absolute — contributions stop at 65, even if you're still on an HDHP and working. There's no exception for self-employed people or those who delay retirement. Once you turn 65, contributions end.