It can be a challenge, but it is possible to save more in HSA.
It needs to be handled carefully but it is possible, depending on age, to save additional money for health costs during retirement, according to CNBC’s article “Over 55? Maximize your savings in this tax-advantaged account.” If you are over 55, you can save an additional $1,000.
Starting in 2019, people with self-only coverage in a high-deductible health insurance plan will be allowed to save up to $2,500 in a Health Savings Account (HSA). If you’ve got family coverage, you can save $7,000.
HSAs permit users to put away money that is pre-tax or tax deductible. The funds accumulate interest on a tax-free basis, and then the account owner can withdraw the money tax-free for qualified medical expenses. Catch-up contributions for those 55 and older of $1,000, make this an even more attractive way to save for health care costs.
However, there are a few complications you’ll need to know about, if you are married and if you are getting close to being eligible for Medicare.
Keeping one HSA, if you’re married and in a high-deductible health plan works, until one of the spouses celebrates a 55th birthday. If the spouse under 55 years has the HSA account, but the older spouse is eligible for the catch-up contribution, the spouse who is over 55 should open their HSA and put away the additional $1,000. There are no joint HSAs, so only the older spouse can make that contribution.
If both spouses are 55, the only way each can make a $1,000 contribution, is if they have separate HSAs. If both spouses have family coverage, they can split the total plan contribution of $7,000 between the two accounts. However, those $1,000 catch up contributions still have to go into the account of the spouse permitted to make that contribution.
Once you or your spouse turns 65 and you enroll in Medicare, you are no longer permitted to make contributions. You can use the funds for qualified medical expenses, but no more contributions.
Let’s say you celebrated your 65th birthday in July and enrolled in Medicare. You were in a plan with self-only coverage. In that case, you are only permitted to make contributions until June—one month before you enrolled in Medicare. The most you are permitted to contribute to your HSA account for that year would be $2,250.
Contribute too much, and you’ll need to get the money out of there. Your deadline to do so is April 15.
One last detail: you are permitted a one-time-only rollover from your IRA to your HSA. There’s a limit, of course: $3,500 if you have self-only coverage or $7,000 if you have a family plan—and the $1,000 catch-up contribution, if you’re over 55.
Reference: CNBC (Dec. 24, 2018) “Over 55? Maximize your savings in this tax-advantaged account”