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Q&A: "Can I Use an HSA Like an IRA if I'm Retired and No Longer Working?"

Healthcare & Medicare Retirement Accounts Tax

Question and background: 

Can I use an HSA like an IRA if I'm retired and no longer working? 

I'm retired with only SS for income, but I have well over $1 million in taxable investments. Since I'm not earning income, I can't put any money into an IRA or Roth. Can I use my HSA as my IRA? Could I put $5k yr into it, invest it in Vanguard's Mid Cap Fund and never use the money, just let it accumulate? It should be tax deductible and grow tax free, right?


Now, there's some creative thinking! The answer is "maybe," depending on a few factors.... 

You didn't mention your age. If you're 65+ and already on Medicare, then the answer is no you can't contribute. Why? An HSA is joined with a High Deductible Health Plan (HDHP) and you can't be enrolled in Medicare and other health plans at the same time. An existing HSA may be maintained once you're enrolled in Medicare, just no further contributions.

On the other hand, if you're not yet enrolled in Medicare but do have a HDHP, in 2014 you can contribute up to $3,300 for single or $6,550 for a family, plus an additional $1,000 if you're age 55+. Unlike a Traditional or Roth IRA, you don't need "earned income" to contribute to an HSA. 

You are correct that an HSA has no Required Minimum Distributions (RMDs), unlike pre-tax IRAs. And if you never need to tap the funds, there's potential for continued tax-sheltered growth until you pass. If you're married and your spouse survives you, they can elect to treat the HSA as their own (under current rules). If other beneficiary(ies) inherit your HSA, they will be required to take distributions. I like the way you think!

Hope that helps. All the best!