Can you rollover an HSA into an IRA?
Asked by: Quentin Schoen | Last update: September 28, 2025Score: 4.3/5 (12 votes)
Can an HSA be rolled over?
Unspent HSA funds roll over from year to year. You can hold and add to the tax-free savings to pay for medical care later. HSAs may earn interest that can't be taxed.
What happens to unused HSA funds at retirement?
After you turn 65 that 20% penalty no longer applies, allowing you to use your HSA funds however you want. You'll still pay income tax, which is similar to how a traditional IRA works when withdrawing money. Using your HSA funds for medical expenses after age 65 will still be eligible as tax-free.
What to do with HSA after leaving job?
Many people have HSAs in conjunction with a job, but the HSA belongs entirely to the employee. If the person leaves their job, the HSA (and any money in it) goes with the employee. They are free to continue using the money for medical expenses and/or move it to another HSA custodian.
How do I avoid tax on my HSA?
Any withdrawal for a non-medical purpose is taxed as regular income. On top of that, there's a 20 % tax on the amount withdrawn. Once you turn 65, you can withdraw money from your HSA for any reason without penalty. But for the distribution to be tax- and penalty-free, it must be used for qualified medical expenses.
IRA to HSA Rollover - Once in a Lifetime Opportunity if You Have a Health Savings Account
What is the tax loophole for HSA?
HSA Tax Advantages
Your contributions may be 100 percent tax-deductible, meaning contributions can be deducted from your gross income. All interest earned in your HSA is 100 percent tax-deferred, meaning the funds grow without being subject to taxes unless they are used for non-eligible medical expenses.
What is the 12 month rule for HSA?
It means you must remain eligible for the HSA until December 31 of the following year. The only exceptions are death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
Can I cash out my HSA?
Yes, you can withdraw funds from your HSA at any time. But please keep in mind that if you use your HSA funds for any reason other than to pay for a qualified medical expense, those funds will be taxed as ordinary income, and the IRS will impose a 20% penalty.
Can you keep an HSA forever?
Myth #2: If I don't spend all my funds this year, I lose it. Reality: HSA funds never expire. When it comes to the HSA, there's no use-it-or-lose-it rule. Unlike Flexible Spending Account (FSA) funds, you keep your HSA dollars forever, even if you change employers, health plans, or retire.
Can HSA be used for dental?
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
Can I transfer an HSA to an IRA?
No. However, you are allowed to make a one-time transfer from an IRA to an HSA.
What is the downside of an HSA?
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
At what age can you no longer contribute to an HSA?
If you work beyond age 65 and defer Medicare, however, you will need to stop contributing to your HSA six months prior to receiving Social Security. Once you begin drawing Social Security after your full retirement age, you are required to have Medicare coverage and can no longer contribute to an HSA.
Can you roll an HSA into a 401k?
If you open your own HSA, you can choose to roll over the funds to a new HSA provider. You can only do one HSA rollover every 12 months. You cannot roll over HSA money into a 401(k) or 401(k) money into an HSA.
Can I use HSA for gym membership?
Gym memberships. While some companies and private insurers may offer discounts on gym memberships, you generally can't use your FSA or HSA account to pay for gym or health club memberships. An exception to that rule would be if your doctor deems fitness medically necessary for your recovery or treatment.
How much should I have in my HSA at retirement?
The amount of money you should have in your HSA during retirement depends on your healthcare needs and circumstances. According to the Fidelity Retiree Health Care Cost Estimate, a single person who is age 65 in 2023 should aim to have about $157,000 saved (after tax) for healthcare expenses during retirement.
What happens to money in HSA if not used?
HSA money is yours to keep. Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred. What happens if my employment is terminated? HSAs are portable and move with you if you change employment.
Is HSA better than 401k?
Comparing HSAs and 401(k)s
The triple-tax-free aspect of an HSA makes it better for tax management than a 401(k). However, since HSA withdrawals can only be used for healthcare costs, the 401(k) is a more flexible retirement savings tool. The fact that an HSA has no RMD gives it more flexibility than a 401(k).
What happens to your HSA when you turn 65?
Once you're 65, your HSA is treated like a traditional IRA if you withdraw money for non-medical expenses. A traditional IRA is a retirement account in which the contributions and gains are tax-free, but withdrawals are subject to income tax.
What happens if I accidentally use my HSA card for non-medical expenses?
You can repay the incorrect distribution before filing your federal taxes for that tax year. However, if you do not correct the mistake, the unqualified amount will be subject to income tax, and you may also face an additional 20% tax penalty.
How to rollover an HSA?
- Find a new HSA provider. Make sure to evaluate investment options, minimums, and any fees at new HSA providers. ...
- Request that your old HSA provider rolls over the cash to your new provider. ...
- Keep contributing to and investing through your HSA.
Can I cash out my HSA when I leave my job?
Yes, you can cash out your HSA at any time. However, any funds withdrawn for costs other than qualified medical expenses will result in the IRS imposing a 20% tax penalty. If you leave your job, you don't have to cash out your HSA.
Are vitamins HSA eligible?
In general, vitamins are not considered an HSA eligible expense unless they are prescribed by a doctor for a specific medical condition. For example, if your doctor prescribes prenatal vitamins during pregnancy or recommends vitamin D supplements to treat a deficiency, those could be eligible expenses under your HSA.
Do I need to report HSA contributions on my tax return?
You must report contributions from your HSA on IRS Form 8889. Get 5498-SA information in the "If I don't have a 5498-SA, how can I get my contributions by tax year?" question below. Find a sample of form 5498-SA from the IRS.
When should I stop investing in my HSA?
Once you hit 65, you can withdraw your HSA funds for non-medical expenses without penalty and pay only income taxes. But you may want to stop contributing then, too, since you may be eligible for Medicare.