Health Savings Account Blog

Let’s start with someone older than 65. Once you turn 65, you are eligible for Medicare, and that means you can no longer contribute to a Health Savings Account (HSA). If you had an HSA before you turned 65, a very interesting thing happens.

The HSA, which was basically an account that could only be used for medical expenses, suddenly becomes an Individual Retirement Account (IRA). It instantly changes status when you turn 65.

This is a very intriguing concept for all of us who are younger than 65. You already know that there is no “use it or lose it” condition for an HSA. You keep accumulating that money forever, you do not lose it at the end of each year.

So, if you’re not sick very often, you may accumulate a lot of money in your HSA. Then, once you turn 65, you can start pulling money out of it each year as income. Your withdrawals are taxable, but won’t it be nice to have another stream of income when you retire. Think of it as your “Healthy Life Reward Account.” The healthier you are in your life, the more money you’ll have left in your HSA. It could be tens of thousands of dollars!

If you are over 55 but younger than 65, you get even more benefits from Health Savings Accounts. You are eligible for something called “catch up contributions.” This means that you can put more money into your HSA than those of us under 55.

The catch-up contribution is $1,000 in 2009 and forward. If I were you, I’d take good advantage of this catch-up contribution. Tax-deferrals are always nice to have when tax time comes around.

You can read our Consumer's Guide to Health Savings Accounts for extensive information on the best ways to use your HSA.