Can you contribute to HSA when retired ?

[Delawaredave5]

Did search. Sorry if I should know this....

After one retires, say 62, and has no earned income (only investment income/pension payments), can they the still contribute to HSA ?

That is, the HSA payment reduces AGI (even for someone not itemizing) ?

Thanks !

https://www.hrblock.com/tax-center/...if you have enough,adjusted gross income (AGI).

 

[MichaelB]

Did search. Sorry if I should know this....

After one retires, say 62, and has no earned income (only investment income/pension payments), can they the still contribute to HSA ?

That is, the HSA payment reduces AGI (even for someone not itemizing) ?

Thanks !

https://www.hrblock.com/tax-center/...if you have enough,adjusted gross income (AGI).

Yes, you can contribute to an HSA as long as you have an HSA eligible policy. Like an IRA, it isn’t a deduction, its an adjustment to income above the line.

 

[RunningBum]

Yes, as long as you have a qualifying HSA eligible medical plan.

 

[Delawaredave5]

Thanks. I have a HSA account with Megacorp - which I assume stays open when retired. I'll also have qualifying high deductible med plan until Medicare.

Thanks again !

 

[HenryD]

Thanks. I have a HSA account with Megacorp - which I assume stays open when retired.

Check to see if they will start charging you fees on the account once retired. Consider Fidelity instead.

 

[jollystomper]

Thanks. I have a HSA account with Megacorp - which I assume stays open when retired. I'll also have qualifying high deductible med plan until Medicare.

Thanks again !

This is our situation. I retired 3 years ago with Megacorp retiree insurance, HSA eligible plan, and have continued to contribute to our HSA. 2021 will be the last year we can fully contribute, as DW turns 65 towards the end of 2022 so it will be a pro-rated contribution for 2022.

 

[SecondCor521]

Yes, as long as you have a qualifying HSA eligible medical plan.

...and are not covered by any other plan, but that nearly goes without saying.

Also, OP, you're eligible for a $1000 catchup contribution to your own HSA starting the year you turn 55.

 

[ExPatKiwi]

The question is why keep contributing to an HSA when retired particularly if your income is from an IRA or LT capital gains? I’m looking at this and feel ROTH conversions would be better than any more HSA contributions.

 

[Born2Fish]

The question is why keep contributing to an HSA when retired particularly if your income is from an IRA or LT capital gains? I’m looking at this and feel ROTH conversions would be better than any more HSA contributions.

Do both Roth conversions and HSA contributions.

You will pay taxes on Roth conversions above the standard or Itemized Tax deduction level.

HSA contributions will NEVER get taxed as long as you use the funds for qualified expenses.

HSAs are the best thing going in my opinion.

 

[RunningBum]

The question is why keep contributing to an HSA when retired particularly if your income is from an IRA or LT capital gains? I’m looking at this and feel ROTH conversions would be better than any more HSA contributions.

An HSA contribution reduces your taxable income from the IRA withdrawals, LTCGs, and Roth conversions. The way I think of it is that my HSA contribution gives me more space to do Roth conversions. Or if I choose not to convert more, I get a larger ACA subsidy due to the HSA contribution.

As it did while working, an HSA contribution gives you a taxable income reduction when contributing, tax free gains, and untaxed withdrawals as long as you use them for a qualifying medical expense. Unless one is severely cash constrained, I can't see a reason to NOT do a full HSA contribution.

 

[SecondCor521]

An HSA contribution reduces your taxable income from the IRA withdrawals, LTCGs, and Roth conversions. The way I think of it is that my HSA contribution gives me more space to do Roth conversions. Or if I choose not to convert more, I get a larger ACA subsidy due to the HSA contribution.

As it did while working, an HSA contribution gives you a taxable income reduction when contributing, tax free gains, and untaxed withdrawals as long as you use them for a qualifying medical expense. Unless one is severely cash constrained, I can't see a reason to NOT do a full HSA contribution.

Agree with the first paragraph. HSA contributions help with anything AGI related, including ACA subsidies. I'm essentially shifting money from taxable to HSA and doing $3.6K more Roth conversions per year.

As for the second paragraph, one reason to stop would be if you figure your HSA is funded enough to cover your medical bills the rest of your life. For people who got started late, that point is probably hard to achieve or maybe even contemplate. A runaway HSA is taxed pretty poorly at death of the owner.

For me, because I want to avoid the HSA taxation at death, I've chosen to fund it only enough so that it can be drained by age 75. That currently means I stop contributing around age 57 according to my simplified spreadsheet.

For my oldest son, who is 26 and in good health with good health insurance, he hasn't started his HSA yet (he prefers Roth IRA, Roth 401(k), ESPP, and taxable, and also tends to avoid expensive medical care more than most). I'll suggest he contribute to one for maybe five years or so then just let it ride for a few decades. Still should be quite a fair bit of money.

 

[Out-to-Lunch]

Of course, if you have over-funded a HSA, you can withdraw the money penalty free (but paying taxes) once you are over 65. Thus, it is no worse than a tIRA in this situation.

 

[RunningBum]

Except for the inheritance issue mentioned above. tIRA must be drained over 10 years, HSA all in the current year.

 

[bada bing]

A somewhat related question:
In the year you turn 65 and start medicare, I know you have to prorate the number of months HDHP covered for a partial year's HSA contribution limit. How does this work with respect to the final month that counts as HSA eligible ? If your birthday is Dec 2, do you begin coverage under medicare on Dec 1 or Jan 1 ? Can you make 12/12 months of HSA contribution for the final year because Dec is still HSA eligible or is your limit for the final year 11/12 ?

 

[Mulligan]

Of course, if you have over-funded a HSA, you can withdraw the money penalty free (but paying taxes) once you are over 65. Thus, it is no worse than a tIRA in this situation.

Considering HSA’s can be used for Medicare premiums and nursing home care, its really hard to establish an amount on whats too high of an HSA balance. Considering its my money for my medical needs and my tax situation greatly favors keeping money in an HSA Im not actively looking to spend it down and will hold for above reasons.
The taxes one pays from inheriting the HSA is a their problem, not mine. Someone having to pay taxes on free money is not my first concern.

 

[SecondCor521]

A somewhat related question:
In the year you turn 65 and start medicare, I know you have to prorate the number of months HDHP covered for a partial year's HSA contribution limit. How does this work with respect to the final month that counts as HSA eligible ? If your birthday is Dec 2, do you begin coverage under medicare on Dec 1 or Jan 1 ? Can you make 12/12 months of HSA contribution for the final year because Dec is still HSA eligible or is your limit for the final year 11/12 ?

If your birthday is on December 2, then Medicare coverage will start January 1st, February 1st, or March 1st, depending on when you sign up during your initial enrollment period. Medicare coverage always starts on the first of a month.

You can make HSA contributions for any of the months before that when you are not on Medicare. So in the case you describe, you could make 12/12 of that years' contribution, and even 1/12 or 2/12 of the next year if you signed up after your birthday.

 

[fosterscik]

I’m pretty sure that’s not correct. Medicare starts on the first day of the month of your birthday. So December 1 in this case

 

[SecondCor521]

I’m pretty sure that’s not correct. Medicare starts on the first day of the month of your birthday. So December 1 in this case

If you're referring to my post, I pretty much attempted to summarize accurately from here:

https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start

I assumed that was a reputable source given the URL.

But you did catch a mistake I made in my summarizing: If you sign up before the month in which you turn 65 (so by November 30th in this example), then it will start on December 1st.

 

[cathy63]

If you're referring to my post, I pretty much attempted to summarize accurately from here:

https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start

I assumed that was a reputable source given the URL.

But you did catch a mistake I made in my summarizing: If you sign up before the month in which you turn 65 (so by November 30th in this example), then it will start on December 1st.

I learned from another thread in this forum that Medicare coverage is retroactive to your birthday month or 6 months, whichever is shorter, so even if you wait and sign up in January, coverage would still start on Dec 1 and you're not eligible to contribute to an HSA for that month. We have a similar situation with DH's December birthday, and I thought I had a plan where he could make the full HSA contribution for the year he turns 65 and just sign up for Medicare in January. I now know that won't work.

See here: https://www.shrm.org/resourcesandto...e-6-month-lookback-for-hsa-contributions.aspx

Beginning in 1983, the Department of Health and Human Services started backdating Medicare coverage retroactively for six months to ensure that people coming off of employer health coverage would not inadvertently find themselves uninsured while transitioning to Medicare. Under current regulations, individuals who apply for Medicare Part A or Part B after reaching age 65 are automatically given six months of retroactive health coverage, which invalidates their ability to make or receive HSA contributions for any of those months they were deemed to be covered.

Many of those people probably already made HSA contributions and are therefore going to have to back out of those contributions or pay the penalty for overcontributing...

 

[SecondCor521]

I learned from another thread in this forum that Medicare coverage is retroactive to your birthday month or 6 months, whichever is shorter, so even if you wait and sign up in January, coverage would still start on Dec 1 and you're not eligible to contribute to an HSA for that month. We have a similar situation with DH's December birthday, and I thought I had a plan where he could make the full HSA contribution for the year he turns 65 and just sign up for Medicare in January. I now know that won't work.

See here: https://www.shrm.org/resourcesandto...e-6-month-lookback-for-hsa-contributions.aspx

Thanks for the additional information. One would think that medicare.gov would be up to date and accurate, so I went back and checked. There is a link on the page I linked to which is titled "I have a Health Savings Account (HSA)", which if you click on it gives essentially the same information that your SHRM link does.

So the information is there, and accurate, it's just not as plain as it could be.

And as a general note, "Medicare" could apparently refer to Part A or Part B (or even C, D, etc.) I didn't read the details closely but "when Medicare starts" appears to vary a bit depending on which part one is referring to. It does look like Part A is enough to preclude HSA contributions, and Part A is where the six months retroactive part comes into play.