Your HSA balance carries forward each year, and you keep the money whether you use it or not

Money in a Health Savings Account does not disappear at the end of the year. Any balance you do not spend rolls over to the next year, and the year after that. You own the account and the money in it — it stays yours as long as the account stays open, even if you change jobs, switch health plans, or go years without touching it.

This is one of the core differences between an HSA and a Flexible Spending Account (FSA), which operates under a "use it or lose it" rule. With an HSA, there is no deadline to spend the money, no forfeiture, and no annual reset that wipes out your balance. The money accumulates.

Key Takeaways

  • HSA balances roll over automatically each year with no limit on how much you can carry forward.
  • You can let the money sit untouched for decades and still withdraw it for may have access to medical expenses at any time.
  • If you withdraw money for non-medical expenses before age 65, you pay income tax plus a 20 percent penalty on the withdrawal amount.
  • After age 65, you can withdraw money for any reason without penalty, though non-medical withdrawals are still taxed as income.
  • Changing jobs, switching health plans, or losing HSA may be able to access does not force you to spend the balance or forfeit it.

How the rollover works year to year

On December 31, whatever money sits in your HSA account stays there. On January 1, it is still yours. Your account custodian (the bank or financial institution holding the account) does not reset the balance, does not charge a fee for carrying it forward, and does not require you to do anything to keep it.

If you contributed $3,000 in 2023 and spent $1,200 on medical expenses, you have $1,800 left. In 2024, you can contribute another $3,000 (or whatever the current limit is), and you now have $4,800 available to spend. The old money and the new money sit together in the same account.

This rollover happens automatically. You do not need to transfer the money, file paperwork, or notify anyone. The balance simply carries forward.

What happens if you change jobs or health plans

Leaving your job does not affect your HSA balance. The account is yours individually, not tied to your employer. When you leave, your employer stops contributing to it (if they were), but the money already in the account remains untouched and under your control.

If your new employer offers an HSA, you can keep your old account open and let it grow, or you can roll the balance into the new employer's HSA plan. You can also leave it where it is and continue using it to pay for medical expenses. There is no requirement to consolidate or close it.

Switching to a health plan that does not may have access to for HSA contributions (such as a PPO or HMO without a high deductible) means you cannot make new contributions that year. However, the money already in the account stays there and can still be used for may have access to medical expenses indefinitely.

Using the money years later

You do not have to spend HSA money in the year you contribute it. You can let it sit for 5 years, 10 years, or longer and withdraw it whenever you have a may have access to medical expense. may have access to expenses include deductibles, copays, coinsurance, prescription drugs, dental work, vision care, and many other out-of-pocket medical costs.

Keep receipts and records of the medical expenses you pay for with HSA withdrawals. The IRS does not require you to submit receipts when you withdraw the money, but you must be able to prove the expense was may have access to if you are audited.

You can also withdraw money to reimburse yourself for medical expenses you paid out of pocket years ago, as long as you did not already deduct them on your taxes. For example, if you paid $500 for dental work in 2022 and did not claim it as a deduction, you can withdraw $500 from your HSA in 2024 to reimburse yourself.

Penalties and taxes for non-medical withdrawals

If you withdraw money from your HSA for something that is not a may have access to medical expense, you owe income tax on the amount withdrawn plus a 20 percent penalty. This penalty applies only to the earnings portion of the withdrawal if the account has been open for less than two years, but once the account is established, the penalty applies to the full withdrawal amount.

Example: You withdraw $1,000 for a vacation. You owe income tax on that $1,000 (at your tax bracket rate) plus $200 in penalties. If you are in the 22 percent tax bracket, your total cost is $220 in taxes plus $200 in penalties, or $420 total.

After age 65, the penalty goes away. You can withdraw money for any reason without the 20 percent penalty. You still owe income tax on non-medical withdrawals, but the penalty no longer applies. This makes an HSA function like a retirement account after 65.

What happens if you lose HSA may be able to access

Losing may be able to access to contribute to an HSA (because you switched to a non-may have access to health plan, enrolled in Medicare, or became covered by someone else's health plan) does not require you to spend the balance or close the account. The money stays in the account and can be used for may have access to medical expenses for the rest of your life.

You simply cannot make new contributions once you are no longer may be able to access. The existing balance continues to roll over year after year.

Building an HSA as a long-term savings tool

Because HSA money rolls over indefinitely and can be invested (many HSA custodians offer investment options), some people use HSAs as retirement savings vehicles. You contribute the maximum each year, pay medical expenses out of pocket if you can afford to, and let the HSA balance grow through contributions and investment returns.

This strategy works because you can withdraw money tax-free for any may have access to medical expense at any point in the future, and after 65 you can withdraw for any reason. Over decades, an HSA can accumulate significant savings.

Not all HSA custodians offer investment options — some keep balances in cash only. Check with your account provider about whether you can invest the money and what options are available.

Frequently Asked Questions

Can I lose my HSA money if I do not use it?

No. HSA money does not expire, and there is no "use it or lose it" deadline. Your balance rolls over every year for as long as the account exists. You can leave the money untouched for decades and withdraw it whenever you have a may have access to medical expense.

What if I have money left in my HSA when I turn 65?

The money stays in the account. After 65, you can withdraw it for any reason without the 20 percent penalty that applies to non-medical withdrawals before 65. You will still owe income tax on non-medical withdrawals, but the penalty disappears.

Do I have to close my HSA if I leave my job?

No. Your HSA is your personal account, not your employer's. You can keep it open and continue using it even after you leave the job. Your employer stops contributing, but the balance you have already built stays with you.

Can I use my HSA balance to pay for someone else's medical expenses?

Only if that person is your spouse or dependent claimed on your tax return. You cannot use HSA money to pay for a friend's or adult child's medical expenses. Doing so triggers the 20 percent penalty plus income tax on the withdrawal.

What happens to my HSA if I die?

The account becomes part of your estate. If your spouse is the beneficiary, they can continue using the account as an HSA. If a non-spouse inherits it, the account is no longer an HSA, and they owe income tax on the full balance, though no penalty applies.