When you turn 65, your Flexible Spending Account (FSA) does not automatically terminate. If you have an FSA through your employer and become eligible for Medicare at age 65, you can continue using the funds in your FSA for eligible medical expenses. The primary factor determining the status of your FSA is your employment with the sponsoring employer, not your age or eligibility for Medicare.
FSA Funds Can Still Be Used with Medicare
Even after you become eligible for and enroll in Medicare, your FSA can still be a valuable resource. The funds in your FSA can be used to cover out-of-pocket medical, dental, and vision expenses that Medicare may not fully cover. This can include:
- Deductibles: The amount you must pay before Medicare starts to cover costs.
- Copayments and Coinsurance: Your share of the cost for covered services after you've met your deductible.
- Prescription Drugs: Costs for medications, especially if you have a separate Part D plan with its own deductibles or copays.
- Dental and Vision Care: Expenses for services like eye exams, glasses, contacts, cleanings, fillings, or dentures, which are generally not covered by Original Medicare.
- Over-the-Counter (OTC) Medications and Products: Many common OTC items, as well as medical supplies and equipment, are eligible.
This allows your FSA to complement your Medicare coverage, helping to reduce your overall healthcare costs.
Key Factors Influencing Your FSA at 65
While turning 65 doesn't directly impact your FSA, other related circumstances might. Understanding these distinctions is crucial:
| Factor | Impact on Your FSA at 65 |
|---|---|
| Continuing Employment | Your FSA generally continues as long as you remain employed and participating in the plan. |
| Becoming Medicare-Eligible | This does not terminate your FSA; you can use FSA funds for Medicare-related out-of-pocket costs. |
| Retirement or End of Employment | If you retire or leave your job, your FSA usually ends on your last day of employment or a defined period thereafter. |
| FSA Plan Year End | Unused funds typically must be spent by the end of your plan year, unless a grace period or rollover applies. |
Understanding FSA Rules: Use It or Lose It
FSAs are subject to the "use-it-or-lose-it" rule, meaning any funds not used by the end of your plan year (or grace period) are typically forfeited. However, many employers offer one of two options:
- Grace Period: An extension of up to 2.5 months after the plan year ends to incur new eligible expenses.
- Rollover: A limited amount (e.g., up to \$610 for 2024) of unused funds can be carried over to the next plan year.
It's important to know your employer's specific FSA rules, especially if you plan to retire around age 65, to ensure you utilize all your contributions.
Practical Insights:
- Plan Ahead: If you anticipate retiring soon after turning 65, try to estimate your remaining medical expenses for the current plan year.
- Use Your Funds: Before your employment ends or your plan year concludes, consider purchasing eligible items like extra contact lenses, prescription refills, or necessary medical supplies.
- Check Eligibility: Always confirm with your FSA administrator which expenses are eligible, as rules can vary slightly. The IRS provides comprehensive guidance on eligible medical expenses.
If Your Employment Ends at 65
Many individuals choose to retire around age 65. If your employment ends, your participation in your employer-sponsored FSA typically ceases on your last day of work. You generally have a limited window, often until the end of the plan year or a grace period (if offered), to incur eligible expenses and submit claims for the funds remaining in your account. Any funds not claimed by this deadline will be forfeited. It's crucial to clarify these specific deadlines with your employer's HR or benefits department.
