Once you reach age 65 your funds can be withdrawn at any time and are only subject to ordinary income tax. However, you may avoid any tax by continuing to use the funds for qualified medical expenses.
For those over age 65, you can use your HSA to pay for:
- Medicare Part A premiums
- Medicare Part B premiums
- Medicare Part D (prescription drug plan) premiums and copays
- Medicare HMO, Medicare Advantage, MAPD plan premiums
- Employee premiums for employer sponsored health insurance
However, although you can use your HSA to pay for Medicare Advantage plans, you CANNOT use your HSA to pay for Medicare Supplement Plan premiums.
When you or your spouse starts receiving and getting billed for Medicare, you can use the HSA to pay those Medicare costs (or reimburse yourself if Medicare is taken directly out of your Social Security Check). Of course, as soon as you hit age 65 and accept Medicare you are no longer eligible to contribute to the HSA (starting in the month of your 65th birthday). An eligible spouse under age 65 can continue to contribute to their HSA and may use that HSA to pay for other spouse’s Medicare part A or part B premiums.