Retiring in 2023, have a couple of HSA questions

[Zoso7]

I'm retiring at age 65 in June. My wife and I are both covered by a family HDHP. I am the one with the HSA, she is already retired. I have been funding my HSA to the maximum allowed via payroll deduction. I want to put the maximum I can into my HSA for 2023, but I need clarity;

- Is it correct that I can only put 5/12's of the maximum in my HSA since I'm retiring June 6th? 

- I plan to file for my Medicare when the window opens for me in March. Will the date of my application affect how much I can fund my HSA in 2023? In other words, should I delay making application for Medicare on March 6th and wait until I'm actually 65, three months later?

- Can I just do an IRA rollover now and fund my HSA to the yearly max?

- Is there any way to get around the 6 month lookback period for an IRA to HSA rollover?

TIA for the considered reply or any strategy suggestions as I wrap up my working life and head to Medicare.

Tim

[dmertz]

Employment is not a requirement to be eligible to contribute to an HSA.  The requirement is that you have qualifying HDHP coverage and no disqualifying other coverage such as Medicare.  Since it appears that your Medicare coverage will start in June (no matter when during the sign-up window you apply), you will be an eligible individual for only the first 5 months of 2023 and therefore your maximum HSA contribution will be limited to 5/12 of the annual limit on both the regular contribution and your catch-up contribution.

It makes no sense for you to bother with an HSA funding distribution.  You can simply take an IRA distribution (no penalty since you are over age 59½) and make a deductible contribution to the HSA for 2023 (subject to the contribution limitations) to achieve the same effect, no special involvement by the IRA custodian.

[Zoso7]

So to confirm, my best strategy is to just let my employer payroll deduct the maximum per month (regular and catchup) until I retire? This will fund my HSA with pretax dollars and leave my IRA or other cash alone as anything extra I would transfer to my HSA would put me over the contribution limit since I'm limited to 5/12's.

Thx,

Tim

[dmertz]

Yes, just continuing to contribute through your employer up to 5/12 of the annual limit would probably be simplest.  The other simple option which would put you a bit more in control would be to stop the contributions through your employer and just make the remaining contributions yourself such that the total does not exceed 5/12 of the annual limit.

[Opus 17]

@Zoso7 

if you apply for Medicare during your window, it will take affect the first day of the month that you turn 65, which is June in your case. So you are correct that your contribution limit is 5/12 of $7750 which is $3229, plus 5/12 your $1000 catch-up, which is $416, for a total of $3645.

It doesn’t matter when in the year you make the contributions, you could even make the contributions after June, but your total for the year can’t be more than that number.

because making contributions through your employer reduces your Social Security and Medicare tax, as well as your state and federal income tax, it is slightly better to make contributions through your employer, than to fund your HSA in another way.

[Zoso7]

All great info, thank you to you both for taking the time to respond, I appreciate and am now assured I'm covering my bases as best I can.

Tim