Dear Liz: I’ve read about the advantages of health savings accounts but didn’t realize I wouldn’t be able to continue contributing to one after turning 65. I haven’t had one long enough to build up much of a balance. If I have a joint HSA with my spouse who isn’t yet 65, can I continue to put money in? If that’s not OK, what’s the penalty if I direct my employer to keep making direct deposits from my wages?
Answer: You can’t really have a joint HSA — they’re considered individual accounts, although you’re allowed to use the funds to pay medical bills for your spouse or for a dependent you claim on your tax returns, such as a child.
Also, turning 65 doesn’t disqualify you from contributing to an HSA — it’s signing up for Medicare that does. In order to contribute to an HSA, you must have a qualifying high-deductible insurance policy and you can’t have other coverage, says Kelley Long, a certified public accountant and personal finance specialist who recently wrote about the tricky intersection of HSAs and Medicare in the Journal of Accountancy.
Normally, delaying Medicare enrollment is not advisable because you can incur lifelong penalties if you don’t sign up when you’re first eligible. Also, Medicare enrollment is usually automatic if you’ve started Social Security benefits. However, you may be able to delay enrolling in Medicare and avoid the penalties if you aren’t receiving Social Security and have health insurance through your job or your spouse’s job. Not all workplace coverage qualifies, so contact the appropriate workplace’s human resources department to make sure. If the employer providing the coverage has fewer than 20 workers, for example, you may need to sign up for Medicare at 65 in order to have primary coverage; the employer’s coverage is typically considered secondary.
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If you no longer qualify for an HSA but your spouse does, you can continue contributing to your HSA up to the individual limit on your spouse’s behalf, assuming you’re the one carrying the coverage, Long says. The individual limit for 2021 is $3,600 plus a $1,000 catch-up contribution for people 55 and older. Check with your benefits department to make sure you’re doing this correctly. If you contribute beyond the individual limit and are also enrolled in Medicare, that would be considered an excess contribution, and the amount of the overage is added back to your taxable income and subject to a 6% penalty.
Social Security for a former teacher
Dear Liz: I am a retired teacher. My wife works in the private sector. She will retire when she is 70 and start to collect Social Security at that time. Currently, I receive a teacher pension. In addition, I have 40 quarters of private-sector work. I may receive a small Social Security benefit after the windfall elimination provision. May I receive Social Security spousal benefits in place of my own Social Security benefits?
Answer: You may, but spousal benefits would also be reduced or perhaps eliminated because of your pension.
The windfall elimination provision, or WEP, reduces the Social Security benefit for people who are receiving pensions from jobs that didn’t pay into the Social Security system. WEP can reduce your benefit by as much as half of your pension amount, but it cannot wipe out your benefit entirely.
The government pension offset, or GPO, meanwhile, reduces Social Security spousal or survivor benefits for people who are receiving such a pension. The reduction can be up to two-thirds of the amount of your pension, and it may wipe out the Social Security benefit entirely.
The Social Security website has WEP and GPO calculators to help you estimate the effects of these rules on your benefits.
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Why delaying Social Security is the smartest retirement play
The 8% annual growth is difficult get elsewhere, so planners often urge clients to tap other money first when they retire.
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Estate tax exemption limit
Dear Liz: In a recent column, under the headline “Here’s how taxes work on estates and inherited money,” you wrote: “After 2025, the [estate tax exemption] limit is scheduled to drop to $3.5 million, but even then very few estates will owe the tax.” However, you did not state the law correctly. Under current law, on Jan. 1, 2026, the applicable exclusion amount will revert to $5 million adjusted for inflation.
Answer: You’re quite right. The estate tax exemption used to be a set dollar amount. In 2009, it was $3.5 million. Congress then raised the limit to $5 million and made it adjustable for inflation. The law that doubled the limit, starting in 2018, is scheduled to sunset after 2025, returning the exemption to $5 million plus inflation.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.