What Happens When You Don't Use Money from Your HSA?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. However, many people wonder what happens if they don't use all the money in their HSA. Let's explore the consequences of not using funds from your HSA:

1. Unused HSA funds continue to roll over from year to year, unlike Flexible Spending Accounts (FSAs) which have a 'use it or lose it' policy.

2. The money in your HSA remains yours indefinitely. There is no expiration date for using the funds, allowing you to accumulate savings over time.

3. You can use the funds for qualified medical expenses at any point in the future, including during retirement when healthcare costs may be higher.

4. If you withdraw funds for non-qualified expenses before the age of 65, you will incur a 20% penalty in addition to paying income tax on the amount.

5. Once you turn 65, you can withdraw funds for any reason without penalty, similar to a traditional retirement account.

6. Some HSAs offer investment options, allowing your funds to grow over time if not used for immediate medical needs.

7. In the event of your passing, the funds in your HSA can be passed on to your named beneficiary tax-free.

It's essential to utilize your HSA funds for qualified medical expenses to maximize the benefits it offers. However, knowing that your money will always be available for healthcare costs provides peace of mind and long-term financial security.

When you have funds in your Health Savings Account (HSA) that go unused, they're not just sitting there. They continue to accumulate year after year, and ensuring that these funds are set aside for future qualified medical expenses can be incredibly beneficial, especially as those expenses grow over time.