Can you cash out your HSA at 65?


Editorial team Published on

After age 65, you can withdraw Health Savings Account (HSA) funds tax-free for qualified medical expenses, or withdraw them for non-medical purposes subject only to ordinary income tax with no extra penalty.

Rules for HSA Withdrawals After 65

  • Qualified Medical Expenses: Withdrawals remain 100% tax-free if you use the money for eligible healthcare costs, such as doctor visits, prescriptions, dental care, and vision. You can also use funds tax-free to pay for Medicare Part B, Part D, and Medicare Advantage premiums.
  • Non-Medical Expenses: The 20% early withdrawal penalty disappears after age 65. If you spend the money on non-healthcare items, you will pay ordinary income tax on the amount, making the account function like a traditional IRA. You can review more details on these distribution options through Fidelity.
  • Medicare Enrollment: You must stop contributing to your HSA once you enroll in Medicare (usually at age 65). However, the money already in the account continues to grow tax-free if invested.
  • No Required Minimum Distributions (RMDs): Unlike traditional 401(k)s or IRAs, HSAs do not force you to take minimum distributions at age 73, allowing you to let the balance grow indefinitely.

Eligible Medical Costs After 65

According to guidelines outlined by HSAstore, you can use post-65 funds tax-free for:

  • Medicare deductibles and copayments
  • Dental, vision, and hearing aids
  • Long-term care services and qualified insurance policies
  • Note: You cannot use HSA funds to pay for Medigap (Medicare supplement) policy premiums.