What To Do With Leftover HSA Money?

Steve has an interesting question about what to do with his leftover health savings account money.

QUESTION: Steve has a health savings account that he’s funding out of his regular salary. At the end of the year, should he take the money out at the end of the year and invest it or leave it in there?

ANSWER: If you take it out, you’ll pay taxes and penalties on it. Leave it in there. It’s basically a health IRA. You can use it to pay medical bills, but you’ll get hit with taxes and penalties if you use it for anything else. If you want to cash flow your medical and leave it in there to grow, or you can pull it out if you need the cash. From a financial standpoint, I love that the medical health savings account is a tax deductible account that’s growing tax-deferred. I fully fund mine every year and let it build up. If you’re 65, you can take it out without penalties or taxes. If you need the money before that, then certainly use the HSA.