Consumers who use Health Savings Accounts (HSAs) and will soon be eligible for Medicare should be aware of certain changes.
In the past few years, Health Savings Accounts have been gaining ground in the industry with millions of consumers enrolling in health plans compatible with the tax-free savings accounts. And now with the Baby Boomer generation set to retire and become eligible for Medicare, those who utilize HSAs may wonder what happens to their funds.
“Health Savings Accounts have shown to be a great tool to help people lower their health insurance premiums and save some money tax-free,” said Mark Colwell, Manager of Consumer Marketing at GoHealthInsurance.com. “But there are a lot of federal rules and regulations surrounding the use of HSAs. It’s important for those who are going on Medicare to know what to expect.”
Can I still contribute to my HSA once I’m eligible for Medicare?
Once you become eligible for Medicare, seniors cannot continue contributing money in their HSA. But consumers can still use the HSA funds tax-free on medical expenses including premiums, deductibles and prescription drugs.
What happens if I become eligible for Medicare during the middle of the year?
You can still contribute money to your HSA until you are officially eligible for Medicare. For example, if your birthday is in May you can continue to add money to your HSA until April.
What is the maximum contribution amount?
The maximum amount of money that can be deposited into an HSA depends on several factors including the account holder's age, and whether the person has single or family coverage. In general for 2014, if you have a qualifying High Deductible Health Plan (HDHP), you can contribute up to $3,300 if you have individual coverage or $6,550 if you have family coverage per year. Your total contribution can also be increased if you are age 55 to 65 with a $1000 'catch-up' contribution.