Q: You told another reader that people can’t make new contributions to a health savings account once they enroll in Medicare, but they can withdraw the money tax-free from the account to pay Medicare premiums. If I have my Medicare payments deducted directly from my Social Security benefits, can I still withdraw money from my HSA for those expenses? And do I need to withdraw the money right away, or can I keep the money growing in the HSA and withdraw it for those premiums sometime in the future?
A: Even though you have your Medicare premiums paid directly out of your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses. After you turn 65, you can use HSA money tax-free to pay premiums for Medicare parts B and D and Medicare Advantage plans (but not premiums for Medicare supplement policies), in addition to paying for other out-of-pocket medical expenses.
Infographic: Health Savings Accounts
And there’s no time limit for withdrawing money from an HSA to pay for those expenses. You can keep the money growing tax-deferred in the account, then withdraw it tax-free at any time in the future to reimburse yourself for any eligible expenses you have incurred since you opened the HSA. So if you’ve had an HSA for several years and didn’t realize you could withdraw money tax-free for Medicare premiums, you could reimburse yourself for all of those premiums at any time.
You just need to keep receipts showing that you paid for eligible expenses. And you can’t withdraw money for expenses you incurred before you opened up the HSA. “When reimbursing himself from the HSA, it’s important that he maintains proof of payment and documentation that the expenses were eligible, in the event of an audit (although he does not need to submit any receipts to be reimbursed),” says Begonya Klumb, head of HSAs for Fidelity Health Care Group.