The short answer
At 65, the 20% penalty on non-medical HSA withdrawals goes away. Withdrawals for qualified medical expenses stay tax-free at any age. Withdrawals for anything else are taxed as income, the same as a traditional IRA.
Two withdrawals, two outcomes
Say you’re 67 and you take two withdrawals in 2026:
- $2,434.80 for a year of Medicare Part B premiums (the standard premium is $202.90 a month): tax-free.
- $10,000 toward a new roof: taxed as ordinary income, but no penalty.
Before 65, that roof withdrawal would have been taxed and hit with a 20% penalty, another $2,000.
Medicare Part B, Part D and Medicare Advantage premiums all count as qualified expenses. Medigap premiums don’t. And there’s no required yearly withdrawal, so the money can stay put until you need it.
Why Medicare ends contributions
Turning 65 doesn’t stop your HSA contributions by itself. Enrolling in Medicare does: starting with the first month you’re enrolled, your contribution limit drops to zero.
The timing can sneak up on you. Medicare enrollment can quietly end your HSA contributions earlier than you’d expect, and the sign-up rules have a few traps. It’s the kind of detail that’s a lot easier to get right before you sign up than after.
If you’re still working past 65, covered by a high-deductible plan, and haven’t enrolled in Medicare, you can generally keep contributing.
Where that leaves you
What your HSA does after 65 comes down to what you want the money to do: cover health costs in retirement, add to your income, or both. That depends on your Medicare timing, your other retirement accounts, and your tax picture, and that’s where we can actually help.
For the full picture on how an HSA can double as a retirement account, see HSAs: The Triple Tax Break Hiding in Your Health Plan.
You know where to find me.
Sources
- 20% penalty before 65, tax treatment after 65, Medicare contribution limit of zero, Medigap exclusion: IRS, Publication 969, “Health Savings Accounts and Other Tax-Favored Health Plans”
- 2026 Part B standard premium ($202.90 a month): CMS, “2026 Medicare Parts A & B Premiums and Deductibles”
- Medicare premiums payable from an HSA: Fidelity, “HSAs and Medicare”