1. Help bridge the gap to Medicare
If you retired before age 65, you still need health care coverage before enrolling in Medicare. You can use your HSA to pay for health care coverage purchased through an employer-sponsored plan under COBRA. You can also use your HSA to pay health insurance premiums while receiving unemployment compensation. These exceptions could be helpful if you lose your job or decide to stop working before turning 65.
2. Cover Medicare premiums
You can use your HSA to pay certain Medicare expenses, including premiums for Part A, Part B, Part C (Medicare Advantage), and Part D prescription drug coverage, but not supplemental (Medigap) policy premiums. Retirees over age 65 who have employer-sponsored health coverage can use their HSA to pay their share of those costs as well.
3. Pay for other expenses
Once you enroll in Medicare, you can use your HSA to pay for any nonqualified medical expenses like buying a boat or new patio furniture, but you don't get to take full advantage of the tax savings; you're required to pay state and federal taxes for such expenditures. (If you're not enrolled in Medicare, you will pay a 20% penalty on nonmedical withdrawals, and you'll also pay taxes for such withdrawals.)