Do I Lose Money Contributed to HSA at the End of the Year?

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HSAs don’t lose money yearly

One common concern people have about HSA (Health Savings Account) is whether they will lose the money contributed to it at the end of the year. The good news is that unlike FSA (Flexible Spending Account), the funds in your HSA do not expire at the end of the year. Here's why:

One common concern many have regarding their HSA (Health Savings Account) is whether the money contributed will disappear at the end of the year. Fortunately, the answer is a resounding no! Unlike a Flexible Spending Account (FSA), where funds can expire, HSAs are structured to be savings accounts that allow your contributions to roll over indefinitely, making it an incredible way to prepare for future healthcare expenses.

Rollover ownership and long-term purpose

HSAs are designed to be long-term savings accounts specifically for medical expenses, so the money you contribute rolls over year after year. This can be a great way to save for healthcare costs in the future, including in retirement. Additionally, the funds in your HSA are owned by you, not your employer, meaning you can take them with you if you change jobs or retire.

In summary, you do not lose the money contributed to your HSA at the end of the year, making it a valuable tool for saving for healthcare costs both now and in the future.

Contribution limits and penalties overview

It's important to note that there are annual contribution limits set by the IRS for HSAs. For 2021, the limit is $3,600 for individuals and $7,200 for families. If you are 55 or older, you can make an additional catch-up contribution of $1,000. These limits are adjusted each year for inflation.

While the money in your HSA does not expire, there are penalties for using it for non-qualified expenses. If you withdraw funds for anything other than qualified medical expenses before age 65, you will owe income tax on the amount withdrawn plus a 20% penalty. After age 65, you can withdraw funds for non-medical expenses penalty-free, but you will owe income tax on the amount withdrawn.