There's a lot of confusion around Health Savings Accounts (HSAs) and Medicare, and for good reason. Making contributions to your HSA after you're no longer eligible can lead to tax penalties and can be a headache to correct. But there are significant misconceptions about how HSA contributions and Medicare enrollment work—even among HSA providers, Medicare workers, and on the Medicare website itself. The purpose of this post is to help clear up one of the most misunderstood aspects of HSA rules for those approaching or past age 65.
Why HSAs matter for retirement planning
HSAs represent one of the most powerful retirement savings vehicles available. Unlike other tax-advantaged accounts, HSAs offer a triple tax benefit: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. For many retirees, healthcare costs represent their largest expense category, making HSAs particularly valuable for long-term financial security.
The Medicare enrollment decision
Upon turning age 65, you become eligible to enroll in Medicare. However, if you're still working and have qualifying coverage through a large employer group plan (generally employers with 20 or more employees), you may choose to postpone Medicare enrollment. Most people delay enrollment for two primary reasons: avoiding Part B premiums before necessary and maximizing HSA contributions to build tax-free savings for future healthcare costs.
The critical distinction: turning 65 vs. already past 65
Here's where many people—and even some financial professionals—get tripped up. The rules for HSA contributions work differently depending on whether you're turning 65 or are already past age 65 when you enroll in Medicare.
When you turn 65 during the year: You can contribute to your HSA for the months you're eligible during that tax year. There's no lookback period, and your Medicare Part A coverage begins when you actually enroll.
When you're already past 65: This is where the infamous "6-month lookback" rule applies. Medicare Part A coverage is deemed to begin six months before your application date, regardless of when you actually enroll.
Understanding the 6-month lookback through examples
Let's illustrate this crucial difference with scenarios involving Monica, who has individual coverage through her employer's HSA-eligible healthcare plan.
Scenario 1: Turning 65 this year
Monica turns 65 on October 20, 2025, and decides to retire on September 30, 2025. She has already contributed $5,300 to her HSA (the 2025 maximum for someone 55 and older). When she applies for Medicare in September with coverage beginning October 1, she realizes she was only HSA-eligible for 9 out of 12 months in 2025.
Because there's no lookback rule when you turn 65, Monica can contribute for each month she was actually eligible. Her maximum contribution is $3,975 ($5,300 ÷ 12 × 9 months). She needs to withdraw $1,325 in excess contributions to avoid tax penalties. The deadline for removing excess contributions is the April tax filing deadline, or April 15, 2026 for Monica, regardless of whether she extends her filing deadline.
Scenario 2: Already past 65
Now let's say Monica is turning 67 in October 2025, but all other facts remain the same. This changes everything. Because she's already past 65, the 6-month lookback rule applies. When she applies for Medicare in September, her Part A coverage is deemed to begin six months earlier—March 1, 2025.
This means Monica was only HSA-eligible for January and February 2025, limiting her contribution to $883 ($5,300 ÷ 12 × 2 months). She would need to withdraw $4,417 in excess contributions—a much more significant correction. But again, as long as she makes this correction by April 15th of the following year, she’ll avoid tax penalties.
Scenario 3: The practical reality
Here's a more realistic situation: Monica has been making $100 monthly HSA contributions through payroll and realizes in September that the 6-month lookback applies. She's contributed $800 year-to-date through August. A lot of people get tripped up here because they are worried that they put money into their account in a month after they enrolled in Medicare, but the timing isn’t the issue, it’s the total amount contributed.
The good news? Monica isn’t in any trouble with this scenario. She simply needs to stop making contributions and can even add the remaining $83 to reach her full eligible amount. The key understanding is that her total 2025 contributions cannot exceed what she was eligible for based on her coverage period, but she can "true up" her contributions until the April tax filing deadline.
Key takeaways for HSA management
The 6-month lookback rule only applies when you enroll in Medicare after already being past age 65. If you're turning 65, you have more straightforward month-by-month eligibility.
Your existing HSA funds remain yours regardless of Medicare enrollment—the rules only affect new contributions. You can continue using HSA funds tax-free for qualified medical expenses indefinitely.
The complexity of these rules underscores why many people benefit from professional guidance when navigating the transition from employer coverage to Medicare. The stakes are high enough—potential tax penalties and lost contribution opportunities—that understanding these nuances before you need to make decisions is crucial.
Planning ahead
If you're approaching 65 and plan to continue working, coordinate with your benefits administrator about HSA eligibility periods and consider how Medicare enrollment timing affects your contribution strategy. If you're already past 65 and haven't enrolled in Medicare, be particularly careful about the lookback implications when you do decide to enroll.
The intersection of HSA rules and Medicare enrollment represents one of the more complex areas of retirement planning, but understanding these mechanics can help you maximize the value of this powerful savings tool while avoiding costly mistakes.