Turning 65 with an HSA: Key Decisions Southern California Edison Employees Should Understand

Healthcare Provider Update: Healthcare Provider for Southern California Edison: Southern California Edison (SCE) primarily utilizes Blue Shield of California as its healthcare provider for employees. This partnership enables the company to offer a variety of health insurance options to its workforce, including comprehensive coverage options tailored to meet the diverse needs of its employees. Potential Healthcare Cost Increases in 2026: As the healthcare landscape shifts, Southern California Edison employees may see a significant impact on healthcare costs in 2026. With projected record increases in insurance premiums-some states reporting hikes exceeding 60%-combined with the potential expiration of enhanced federal subsidies, many employees could face out-of-pocket premium spikes exceeding 75%. Factors contributing to this trend include rising medical costs and aggressive rate hikes from major insurers, which underline the importance of strategic planning for healthcare expenses as retirement approaches. Adapting to these changes is essential for maintaining financial stability and ensuring access to necessary healthcare services. Click here to learn more

'Southern California Edison employees nearing Medicare eligibility should recognize that thoughtful coordination of HSA rules with broader retirement strategies can help them make well-informed decisions during this transition,' — Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.

'Southern California Edison employees approaching age 65 can benefit from reviewing how HSA rules change with Medicare enrollment so they can make informed choices that support their long-term retirement planning,' — Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. How Health Savings Accounts (HSAs) function as you approach Medicare eligibility at age 65.

2. Key contribution, withdrawal, and tax rules that may affect retirees transitioning from Southern California Edison.

3. Important planning considerations for coordinating your HSA with Medicare, retirement income, and estate strategies.

Things Retirees Should Know About Managing Their HSA at Age 65

An important long-term planning tool for many households nearing retirement—especially those transitioning from Southern California Edison—is the Health Savings Account (HSA). Tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for approved medical costs are the three major tax advantages HSAs provide. However, the rules shift as you approach Medicare eligibility, making it essential to understand how HSAs work alongside Medicare and retirement income planning.

“Most people underestimate the strategic value of their HSA in retirement,” observes Brent Wolf, CFP®, Wealth Enhancement. An HSA can evolve from a simple spending bucket into a meaningful tax planning tool after age 60 for many who spent years in the Southern California Edison workforce.

“For high-income earners, an HSA can function like a stealth IRA—one you can tap tax-free when you plan carefully,” Brent explains. However, proper coordination becomes increasingly important as you transition to Medicare.

Prior to Age 65: Eligibility and Contributions

HSA contributions are only permitted during months in which you qualify as an eligible individual, which generally requires coverage under a high-deductible health plan with no disqualifying insurance.

The 2026 HSA contribution limits are $4,400 for individuals and $8,750 for families, and individuals age 55 or older may make an additional $1,000 catch-up contribution before year-end. ¹

One of the most flexible aspects of HSAs is the lack of an IRS time limit for reimbursing qualified medical expenses, ²  as long as those expenses were incurred after the HSA was opened and have not been paid elsewhere. This gives retirees—Southern California Edison professionals included—the ability to withdraw funds tax-free years later by retaining receipts.

This flexibility can be especially valuable when coordinating retirement income strategies, Medicare IRMAA thresholds, Social Security taxation considerations, and Roth conversions.

Medicare Changes the Rules at Age 65

Medicare enrollment becomes a major turning point in HSA planning. Once enrolled in any Medicare coverage—such as Part A—you can no longer make contributions to your HSA. Additionally, Medicare Part A is often applied retroactively for up to six months, which affects HSA eligibility during those months.

To prevent “excess contributions,” many retirees—including those leaving Southern California Edison—choose to stop HSA contributions several months before Medicare begins to account for this retroactive enrollment.

Even after enrolling in Medicare, you may continue using your HSA tax-free to pay for eligible expenses, including premiums for Medicare Advantage (Part C), Part B, and Part D.

After 65: Expanded Withdrawal Options

After turning 65, the 20% penalty no longer applies to HSA withdrawals used for non-medical purposes. Instead, these withdrawals are taxed as ordinary income—similar to IRA distributions. Meanwhile, withdrawals used for qualified medical expenses remain tax-free.

“An HSA offers flexibility for retirees with adequate liquidity,” Brent notes. Southern California Edison retirees may find an HSA helpful as either a tax-free medical expense tool or a supplemental income source.

Estate Planning Considerations

HSAs carry unique rules when passed to beneficiaries. If the spouse is named as the beneficiary, the account becomes the spouse’s own HSA and retains its tax-advantaged treatment.

If the beneficiary is anyone else, the HSA ceases to exist upon the account holder’s death, and the fair market value becomes taxable income that year.

“Make sure your beneficiary designations align with your overall estate plan if your HSA may outlive you,” advises Brent. This helps confirm the account is handled according to your intentions.

How The Retirement Group Can Assist

Coordinating income, tax, and health care planning is important if you have a meaningful HSA balance and are nearing Medicare eligibility as a retiring Southern California Edison professional. The Retirement Group can help you incorporate your HSA into a broader retirement plan and evaluate available options.

For guidance or support, call  (800) 900-5867  to speak with our team.

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Sources:

1. IRS.  Revenue Proclamation 2025-19 . 2025.

2. Van de Water, Paul N.  Health Savings Accounts (HSAs).  Congressional Research Service, 11 Feb. 2025,  www.congress.gov/crs-product/R45277 .

Other Resources:

1. Fidelity Investments. “5 Ways HSAs Can Help with Your Retirement.” Fidelity Viewpoints, Fidelity Investments, n.d.,  www.fidelity.com/viewpoints/wealth-management/hsas-and-your-retirement .

2. Medicare Rights Center. “Health Savings Accounts (HSAs) and Medicare.”  Medicare Interactive , 1 May 2025,  www.medicareinteractive.org/understanding-medicare/coordinating-medicare-with-other-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare .