What happens to HSA money after age 65?
Asked by: Jaydon Becker | Last update: November 4, 2025Score: 4.9/5 (28 votes)
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 happens to my HSA when I turn 65?
One benefit of the HSA is that after you turn age 65, you can withdraw money from your HSA for any reason without incurring a tax penalty. You are, however, subject to normal income tax on any non-qualified withdrawals.
At what age can you no longer have an HSA?
When you turn 65 and begin Medicare coverage, you lose HSA eligibility on the first day of that month. For example, if your birthday is April 19, you are no longer eligible to contribute to an HSA as of April 1.
How to preserve your HSA eligibility beyond age 65?
To maintain eligibility, individuals need to wait to sign up for Medicare and delay filing for Social Security benefits until they decide to either stop working or stop contributing to the HSA.
Health Savings Account (HSA) Withdrawal After Age 65 in Retirement - Tax Free!
Can you withdraw HSA tax-free after 65?
At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense. Withdrawals made for other purposes will be subject to ordinary income taxes.
Will HSA money expire?
Your HSA contributions don't expire. The money stays in the HSA until you use it.
What happens to HSA when no longer eligible?
First of all, "HSA-eligible" just means that you're eligible to contribute to an HSA. You can still own an HSA when you're not HSA-eligible. And you can still withdraw money from that HSA, tax-free as long as the money is used to pay for qualified medical expenses.
Can you withdraw HSA money?
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 HSA be inherited?
Here are some basic things to know: Spouse's rights: If you name your spouse as your beneficiary, they inherit your HSA tax-free and can continue to use the account as their own HSA. Some HSA companies have policies that automatically designate your spouse as the beneficiary if you didn't name one.
How much can a 65 year old contribute to an HSA?
HSA members can contribute up to the annual maximum amount that is set by the IRS. Those 55 and older are allowed by the IRS to contribute an extra $1,000 to their annual maximum amount. Those 55 and older are allowed by the IRS to contribute an extra $1,000 to their annual maximum amount.
What happens to my HSA when I go on Medicare?
While you can continue to spend from your HSA, you cannot set up or contribute to an HSA in any month that you are enrolled in Medicare. age, Social Security will give you six months of “back pay” in retirement benefits. This means that your enrollment in Part A will also be backdated by six months.
Can I transfer money from my HSA to my bank account?
Online Transfers – On HSA Bank's member website, you can reimburse yourself for out-of-pocket expenses by making a one-time or reoccurring online transfer from your HSA to your personal checking or savings account.
What happens to HSA money if you don't spend it?
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. You generally can't use HSA funds to pay premiums.
What can you do with HSA after 65?
While you can't put any more money into your HSA after you enroll in Medicare, you can continue to withdraw tax-free money to pay for medical expenses. You can then use the money in your HSA to pay your out-of-pocket expenses under Medicare (deductibles and coinsurance, plus copays or coinsurance for medications).
What happens if you don't withdraw excess HSA contributions?
The IRS imposes a 6% excise tax on any excess accumulation in your HSA. This tax is applied each year until the excess amount is withdrawn from the account. The excise tax is in addition to any income tax you may owe on the excess contribution.
What happens to HSA when you retire?
What happens to my HSA if I change health plans, terminate employment, or retire? The money in the HSA belongs to you. You can continue to use the money in your HSA to pay for qualified medical expenses but you can no longer make contributions to the account unless you are enrolled in another HSA-eligible HDHP.
What happens if you use HSA money for non-medical?
In addition, if HSA funds are withdrawn before age 65 and not used for eligible medical expenses are generally subject to an additional 20% tax penalty. In other words, you may lose the tax benefits when you use HSA for non-medical expenses. There may also be a significant tax fee or penalty.
What happens to HSA if you quit?
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.
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.
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).
What to do with old HSA money?
When changing jobs, you can consolidate your old HSA into a new HSA offered by your next employer, keep your old HSA, or roll over to a new HSA under a different financial services firm. You could also keep your old HSA although that may entail fees that may have been previously covered by your employer.
Can you ever cash out HSA?
As a practical matter, you are allowed to withdraw funds from your HSA at any time for any reason. But if you aren't using the funds to cover a qualified medical expense, then you'll be stuck paying a penalty tax.
What happens to unused HSA funds at the end of the year?
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.
When should I close my HSA account?
You must close your FHSA after you've had it for 15 years or by the end of the year you turn 71 — whichever comes first. Learn more about the FHSA . The FHSA is a new kind of savings plan. If you're unsure about whether it's right for you, consider your long-term.