What Happens to Money in an HSA When You Turn 65?

When you turn 65, there are some changes that occur to the money in your Health Savings Account (HSA). A Health Savings Account is a tax-advantaged savings account that is used in conjunction with a high-deductible health plan (HDHP). Here’s what happens to the money in an HSA when you reach 65:

1. You can still use the money for qualified medical expenses tax-free. Even after turning 65, you can continue to use the funds in your HSA for any qualified medical expenses without incurring any tax penalties.

2. You can use the money for non-qualified expenses. If you withdraw money from your HSA for non-qualified expenses after turning 65, you will only pay income tax on the amount withdrawn, similar to a traditional retirement account.

3. You can use the money for Medicare premiums. Once you reach 65 and enroll in Medicare, you can use your HSA funds to pay for Medicare premiums, including Part A, Part B, and Part D premiums.

4. You can use the money for long-term care expenses. If you require long-term care services, you can use your HSA funds to pay for qualified long-term care expenses tax-free.

5. You can use the money as a retirement fund. If you have accumulated a significant amount in your HSA by the time you turn 65 and do not need it for medical expenses, you can use it as a retirement fund. While you will pay income tax on withdrawals for non-medical expenses, there are no penalties after age 65.

Upon turning 65, you should be aware that your Health Savings Account (HSA) continues to be a versatile tool for managing both medical expenses and retirement savings. Maintaining the ability to tap into tax-free funds for qualified medical expenses is a significant advantage, enabling you to manage your health effectively as you age.