HSA Withdrawals after Age 65

HSA Withdrawals after Age 65

Before age 65, the money in an HSA can only be used tax-free for qualified medical expenses. If you withdraw your HSA funds for anything else, the money will not only be taxed, but you will also pay a 20 percent penalty fee.

After age 65, the rules regarding use of your HSA funds change in the following ways:

• Health insurance premiums – You can use your HSA funds tax- and penalty-free to pay premiums for employer-sponsored health coverage or for Medicare.
• Nonmedical retirement expenses – Although money used for nonmedical expenses will be subject to federal—and usually state—income taxes, after age 65 you will not be subject to the 20 percent penalty fee.

After age 65, your eligibility will typically end for HSA contributions. However, your options expand for using the money that you have saved in the account.

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