What Happens If You Don't Spend Down Your HSA?

Many individuals have Health Savings Accounts (HSAs) to help cover medical expenses. However, some people may wonder what happens if they don't spend down their HSA funds. Let's explore the implications of not using all your HSA funds:

If you don't spend down your HSA:

• Your HSA funds will continue to roll over from year to year, unlike Flexible Spending Accounts (FSAs) which have a 'use it or lose it' rule.
• You can keep your HSA account open indefinitely, allowing the funds to grow tax-free for future medical expenses.
• Unused HSA funds can serve as a valuable retirement savings tool as you age and may face increased healthcare costs.

However, there are a few things to keep in mind:

• If you withdraw HSA funds for non-qualified medical expenses before age 65, you will incur a 20% penalty in addition to paying income tax on the amount withdrawn.
• Once you turn 65, you can withdraw HSA funds for non-medical expenses penalty-free, though you will still owe income tax.
• It's essential to track your medical expenses and save receipts to prove the withdrawals were for qualified medical purposes.

Have you ever thought about what happens if you don't use your Health Savings Account (HSA) funds? The good news is that HSA funds are a fantastic way to save for future medical costs, allowing you to grow your balance tax-free over the years.