# 5 HSA Mistakes That Drain Your Savings

> Five common HSA mistakes, from contributing on Medicare to overfunding, and how to fix each one.

Canonical: https://christianbrinkleync.com/guides/hsa-mistakes-to-avoid

## Quick answer

The most expensive HSA mistakes are contributing while on Medicare and overfunding the account, since both trigger penalty taxes. Others are quieter, like leaving the balance in cash instead of investing it. A few checks each year keep the triple tax advantage intact.

## Mistake 1: Contributing while on Medicare

Once you enroll in any part of Medicare, you can no longer contribute to an HSA, even if you still work. Contributions made after Medicare enrollment are excess and get taxed plus penalized. If you work past 65 and delay Medicare, you can keep contributing. Stop six months before you file for Social Security because of retroactive Part A.

## Mistake 2: Overcontributing past the limit

For 2026 the HSA limit is $4,400 for self-only coverage and $8,750 for family coverage, including what your employer puts in. Go over and the excess faces a 6% excise tax each year until removed. Add up your payroll deductions and employer contributions midyear so there are no surprises in December.

## Mistake 3: Not investing the balance

Most HSA providers let you invest once your balance clears a threshold. Money sitting in cash earns almost nothing, while invested money grows tax-free for medical costs later. Treat the HSA like a retirement account after you have a cash buffer for this year's deductible.

## Mistake 4: Missing the 55-plus catch-up

If you are 55 or older, you can add an extra $1,000 to your HSA each year on top of the regular limit. Many people near retirement miss this simply because nobody tells them. If your spouse is also 55 or older, they need their own HSA to make their own catch-up.

## Mistake 5: Using it for non-medical costs before 65

Spending HSA money on non-medical expenses before age 65 triggers income tax plus a 20% additional tax. After 65 the penalty goes away and non-medical withdrawals are taxed like retirement account distributions. Keep receipts for medical costs so you can reimburse yourself years later, tax-free.

## HSA mistakes and the fix for each

| Topic | How they compare |
| --- | --- |
| Contributing while on Medicare | Stop contributions before Medicare starts |
| Overcontributing past the limit | Count employer contributions toward the cap |
| Not investing the balance | Invest above your cash buffer |
| Missing the 55-plus catch-up | Add the extra $1,000 at 55 |
| Non-medical spending before 65 | Save receipts and reimburse later |

## Checklist

- [ ] Confirm you are not on Medicare before contributing each year.
- [ ] Total your contributions plus employer contributions against the $4,400 or $8,750 limit.
- [ ] Invest the balance above your deductible cash buffer.
- [ ] At 55, add the $1,000 catch-up contribution.

## Frequently asked questions

### Can I contribute to an HSA if I am on Medicare?

No. Medicare enrollment ends HSA eligibility, even if you keep working. Stop contributions the month Medicare begins. You can still spend existing HSA money tax-free on qualified medical costs.

### What happens if I overcontribute to my HSA?

The excess is hit with a 6% excise tax every year it stays in the account. Withdraw the excess plus earnings before the tax filing deadline to avoid the penalty. Employer contributions count toward the same $4,400 or $8,750 limit.

## Sources

- [IRS: Publication 969, Health Savings Accounts](https://www.irs.gov/publications/p969)
- [IRS: Retirement Plans](https://www.irs.gov/retirement-plans)

## Related

- [HSA explained in plain English](https://christianbrinkleync.com/wealth/hsa-explained)
- [Roth IRA explained in plain English](https://christianbrinkleync.com/wealth/roth-ira-explained)
- [Compound interest calculator](https://christianbrinkleync.com/tools/compound-interest)

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Educational content only, not financial or tax advice. Published by Christian Brinkley, christianbrinkleync.com.