health savings account

Q&A: Don’t leave your finances on automatic

June 22, 2026 By Liz Weston

Dear Liz: During the 2024 open enrollment period for Medicare, your column mentioned that Part D enrollees’ out-of-pocket payments in 2025 would be limited to $2,000, but only for covered prescriptions. That spurred me to be sure my prescription drug plan covered the one brand name drug I take. It didn’t and I found the only plan in my area that does just in time before the open enrollment period ended.

More recently, I learned from your column that I can pay Medicare premiums from my health savings account. Like many HSA participants, I have been letting my contributions accumulate for later-in-life medical expenses. But now that my husband and I are investigating moving into a continuing care retirement community, it helps to know that we have the option of paying Medicare premiums this way and have more money left over each month after we pay the monthly fee.

Answer: Thanks for sharing those experiences!

It can be easy to leave our finances on automatic, but there are at least two areas where it’s important to shop every year: health insurance and auto insurance. Health insurers constantly change their formularies, or list of covered drugs, as well as what tier a drug might be assigned to. A prescription you get cheaply this year could be more expensive next year or not covered at all. Auto insurers, meanwhile, tend to raise rates on loyal customers because they know many people will stay put out of inertia.

It’s also important to have a plan to eventually spend HSA funds before you die. A spouse can inherit an HSA and retain its tax advantages, but the account becomes taxable if anyone else inherits it.

Q&A: Mistaken HSA withdrawal is fixable until April 15

October 13, 2025 By Liz Weston

Dear Liz: I need some help understanding health savings account distribution rules. I was injured and bought medical supplies with my credit card, then reimbursed myself from my HSA. When I didn’t need the supplies, I returned them for a refund. What now? It seems like the money should go back to the HSA, but it’s not clear how to do that. Are there tax implications for a non-qualified HSA withdrawal made in good faith?

Answer: You typically have until April 15 of the following year to return funds mistakenly withdrawn from a health savings account. Otherwise, the withdrawal would incur income taxes and a 20% federal penalty.

Mistakes aren’t uncommon. Contact your HSA custodian, which likely has a procedure to get the money back into your account.

Q&A: What can retirees do to deduct medical expenses?

August 5, 2025 By Liz Weston

Dear Liz: My wife and I, both in our early 90s, are fortunate to have good health insurance. However, we have significant expenses that are not covered. As you might expect, we are retired and receive income from Social Security, pensions, annuities and investments. Are we eligible to use flexible health accounts funded with pretax dollars? If so, what’s the best way to set that up and how would we pay those uncovered health bills?

Answer: Unfortunately, you don’t have access to pretax accounts that could help you pay medical bills.

Flexible spending accounts are offered by employers, and contributions are limited annually (in 2025, the limit is $3,300). Health savings accounts have higher limits but require you to have a qualifying high-deductible health insurance plan. Once you’re on Medicare, as you two presumably are, you are no longer allowed to contribute to an HSA.

You might be able to deduct medical expenses that exceed 7.5% of your adjusted gross income. To claim the deduction, you would need to have enough itemized expenses to exceed the standard deduction, which in 2025 is $34,700 for a married couple filing jointly who are 65 and older. (The standard deduction for a married couple filing jointly is $31,500, while people 65 and older get an additional deduction of $1,600 each.)

There’s also a new, temporary $6,000 deduction for people 65 and older that is available whether you itemize or take the standard deduction. This bonus deduction begins to phase out for adjusted gross income above $150,000 for married couples filing jointly and disappears at AGIs above $250,000. This deduction is set to expire after the 2028 tax year.

Q&A: Confusion about spending HSA money after 65

March 3, 2025 By Liz Weston

Dear Liz: I’ve read that after age 65, health savings account money can be spent on anything. Your recent column said it could be spent only on medical expenses. Which is true?

Answer: At age 65, there is no longer a penalty if you spend HSA money on something other than qualifying medical expenses. Those withdrawals will be subject to income tax, however, so you’d be losing one of your HSA’s three tax breaks (deductions on contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses).

You don’t have to have incurred the medical expenses in the same year you spend the money for the withdrawals to be tax-free, however. Savvy HSA owners keep records of any out-of-pocket medical expenses that weren’t reimbursed by insurance, flexible savings accounts or other means. As long as the unreimbursed expenses were incurred after the HSA was established, they can be used to justify tax-free withdrawals years or even decades in the future.

Q&A: Tapping into a Health Savings Account while on Medicare

February 18, 2025 By Liz Weston

Dear Liz: I’m on Medicare but I also have a health savings account with a fair market value of over $9,000. Am I able to spend this on prescriptions, eye care, etc.? I hate to waste this money. My wife passed away and it’s been sitting there for a while.

Answer: You can’t contribute to an HSA once you’re on Medicare, but you can certainly spend the money you’ve accumulated.

As mentioned in previous columns, HSAs offer a triple tax break in that contributions are deductible, the account grows tax-deferred and withdrawals are tax-free for qualifying medical expenses. Those expenses can include dental and vision costs as well as Medicare premiums.

If anyone other than a spouse inherits the account, the HSA becomes taxable so you’ll definitely want to spend that money while you can.

Q&A: Health savings accounts offer a rare triple tax break. Here’s what to know

January 7, 2025 By Liz Weston

Dear Liz: Can I contribute additional money to my health savings account, above the amount I’m contributing through payroll deduction? Also, I have an HSA account from a previous employer and one from my current employer. Can I combine the two?

Answer: If you have a qualifying high-deductible health insurance plan, you can contribute up to $4,300 this year to an HSA if the plan covers just you or $8,550 if the plan covers your family. If you’re 55 or older, you can contribute an additional $1,000. You can make additional contributions if your payroll deductions for the year, plus any employer contributions, fall short of the limit.

Maximizing your contributions can make sense because HSAs offer a rare triple federal tax break. Contributions are pre-tax, the money grows tax deferred and qualifying medical expenses can be paid with tax-free withdrawals. You can invest the money in your HSA for growth, and the balance can be rolled over year after year, making it a powerful potential supplement to other retirement plans. Although HSAs can be used any time to pay for medical costs, many HSA owners pay those expenses out of pocket so their accounts can continue to grow.

Consolidating an old HSA into your current one can be a smart move because combining accounts can reduce account fees and make it easier to manage your investments. You’ll also run less risk of losing track of an account.

The best way to consolidate would be to contact your current HSA provider and ask them to facilitate a direct trustee-to-trustee transfer from the old account. However, not all providers allow “in kind” transfers of investments. It should be no problem to transfer any cash in the account, but you may be required to sell the investments. You won’t owe federal tax on such a sale, but some states, including California, will tax any capital gains that result.