Can You Contribute to an HSA If You Are No Longer Employed?
Understand how HSA eligibility and contributions adapt to career changes. Your health plan, not your job, determines your ability to save.
A Health Savings Account (HSA) provides a tax-advantaged savings mechanism to help individuals pay for current and future medical expenses. This account is linked to specific types of health insurance plans, offering a way to save and spend money on healthcare needs.
Understanding HSA Eligibility
Eligibility to contribute to a Health Savings Account primarily hinges on being covered by a High-Deductible Health Plan (HDHP). An HDHP is a health insurance plan that meets specific annual deductible and out-of-pocket maximum thresholds set by the Internal Revenue Service. For 2025, an individual HDHP must have a deductible of at least $1,650 and an out-of-pocket maximum of no more than $8,300. Family HDHPs have higher corresponding limits.
Beyond HDHP coverage, an individual must not be covered by other health insurance that is not an HDHP, including general-purpose flexible spending arrangements (FSAs) or health reimbursement arrangements (HRAs). Enrollment in Medicare or being claimed as a dependent on someone else’s tax return also disqualifies an individual from contributing to an HSA.
HSA Contribution Rules After Employment
An individual’s ability to contribute to an HSA after leaving a job depends on their continued eligibility, which is tied to their health insurance coverage. Employment status itself does not determine HSA contribution eligibility. If an individual transitions to a new employer’s health plan that qualifies as an HDHP, they can continue to contribute. If they obtain an individual HDHP through a marketplace or private insurer, eligibility remains.
However, if post-employment health coverage is not an HDHP—for example, switching to a traditional health plan, enrolling in COBRA for a non-HDHP, or becoming eligible for Medicare—then HSA contributions must cease. Contributions are determined pro-rata, based on the number of months an individual was HSA-eligible. For example, if eligible for six months, the contribution limit is half of the annual maximum.
Even if contributions stop, accumulated funds remain available to the account holder. The HSA is portable and owned by the individual, regardless of their employment status or current health plan.
Managing and Using Your HSA Funds
Once funds are deposited into an HSA, they belong to the account holder and remain accessible even if contribution eligibility changes. These funds can be used tax-free for qualified medical expenses at any time. Qualified expenses include a wide range of medical, dental, and vision care costs, as defined by IRS regulations.
A significant advantage of HSAs is their “no use it or lose it” feature, meaning funds roll over year after year without expiration. This allows individuals to accumulate savings, which can also be invested similar to a retirement account, potentially growing tax-free. Many HSA providers offer investment options once a certain cash balance is maintained.
Beyond healthcare, HSAs can serve as an additional retirement savings vehicle. After reaching age 65, individuals can withdraw HSA funds for any purpose without incurring penalty. While these withdrawals will be subject to income tax if not used for qualified medical expenses, they are not subject to the 20% penalty for non-qualified withdrawals made before age 65. This flexibility makes HSAs a versatile financial tool for both current healthcare costs and future financial planning.