Is it Wise to Withdraw Excess Funds from Your Health Savings Account (HSA)?
Learn why withdrawing excess HSA funds for non-medical expenses can lead to taxes and penalties, and why saving is a better option.
Video transcript
It's advisable to avoid withdrawing excess funds from your Health Savings Account (HSA) unless absolutely necessary. Withdrawals for non-medical expenses are subject to income tax and a 20% penalty if you're under 65. Instead, consider saving the funds for future medical expenses, as the balance in an HSA rolls over annually and continues to grow tax-free.
Questions and answers
What happens if I withdraw excess funds from my HSA for non-medical expenses?
Withdrawals for non-medical expenses are subject to income tax and an additional 20% penalty if you are under 65 years old.
Can HSA funds roll over year to year?
Yes, the balance in your HSA rolls over annually, allowing your savings to grow tax-free over time.
Are there any penalties for HSA withdrawals after age 65?
No, after age 65, HSA withdrawals for non-medical expenses are taxed as income but are not subject to the 20% penalty.
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