What happens to my HSA account when I turn 65?
Asked by: Sophie Olson | Last update: August 6, 2025Score: 4.4/5 (35 votes)
Are HSA withdrawals 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.
Do I have to stop contributing to my HSA when I turn 65?
You don't have to stop HSA contributions upon reaching age 65. You won't lose HSA eligibility until you enroll in Medicare. Just keep in mind that Medicare Part A enrollment will be six months retroactive, so you'll have to account for that issue.
Does an HSA turn into an IRA at age 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 to HSA money when you go on Medicare?
Even if enrolled in Medicare, you may keep an HSA if it was in existence prior to Medicare enrollment. You can spend from your HSA to help pay for medical expenses, such as deductibles, premiums, copayments, and coinsurances. If you use the account for qualified medical expenses, it will continue to be tax-free.
Health Savings Account (HSA) Withdrawal After Age 65 in Retirement - Tax Free!
Do you have to stop HSA contributions 6 months before Medicare?
Since you will be older than 65 when applying for Medicare, you will need to stop HSA contributions 6 months before applying. Behind the scenes, Medicare Part A has a 6-month retroactive start date. And therefore, contributions to an HSA become ineligible six months before filing the application.
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 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).
Can I cash out an HSA?
You can withdraw funds from your HSA at any time to cover qualified medical expenses, which are listed below. The amount you can withdraw in a given year varies based on your medical costs.
Can my spouse use my HSA if they are on Medicare?
Your spouse can be on Medicare without disqualifying you from contributing to your HSA, and your spouse can continue to be covered by the HSA qualified plan, as well as use HSA funds to cover their qualified medical expenses.
What is the penalty for HSA after 65?
Can my HSA be used for anything other than qualified health care expenses? 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.
What is the HSA account loophole?
The ultimate loophole available to almost everyone under the age of 65 in our tax code is the Health Savings Account (HSA). It is the only account you can contribute to and deduct the contribution and then withdraw the money tax free. Think about that, a tax deduction going in and no taxes going out.
Can HSA be used for dental?
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental 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.
How much should you have in your 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.
Can you collect social security and still contribute to an HSA?
As discussed above, you can't have Medicare Part A and open or contribute to an HSA. However, you can't opt out of Part A while collecting your Social Security retirement benefits either. If you want to contribute to your HSA, you must delay your Social Security payments so you can decline Medicare Part A.
Can you use HSA for non-medical expenses after age 65?
Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes.
Can I move money out of 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 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.
Can you go negative in your HSA account?
The IRS states that having a negative HSA balance is prohibited by federal law. And while the IRS doesn't provide any specific guidance beyond that statement, you need to be sure that no expenses cause your HSA to fall into a negative balance. Long story short—don't overdraw your HSA.
What is the biggest advantage of an HSA?
- Federal tax advantages.
- Savings on qualified medical expenses.
- Many unreimbursed medical expenses qualify.
- Annual rollover.
- Others can contribute, including the participant's employer or family member.
- Convenience.
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).
At what age can you withdraw from HSA without penalty?
After age 65, you can use your HSA withdrawal for non-medical expenses without paying the 20% tax penalty.
What is the 6 month rule for Medicare and HSA?
If you have a Health Savings Account (HSA), you and your employer should stop contributing to your HSA 6 months before you retire or apply for benefits from Social Security (or the Railroad Retirement Board). This will ensure you avoid a tax penalty.
Does your HSA stay with you forever?
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.