HSA Withdrawals After You Turn 65
Once you turn 65, you can withdraw money from your HSA for any reason without the 20% penalty. Medical expenses remain tax-free, but non-medical withdrawals are subject to income tax.
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Short answer
At age 65, the HSA penalty rule changes. You can withdraw money for any reason without the 20% additional tax. If you withdraw for a qualified medical expense, the withdrawal is completely tax-free. If you withdraw for something else, you pay income tax on the amount, but not the 20% penalty. HSA money carries over year to year indefinitely, so you can take what you need whenever you need it.
The withdrawal process works the same way: you submit a request to your HSA administrator with the required documentation, they review it, and they pay you by deposit or check. For medical expenses, a letter of medical necessity may be needed. For non-medical withdrawals at 65 and older, you only need to notify your administrator and provide your tax information so they can issue the correct tax form (Form 1099-SA).
The path in five steps
HSA withdrawals after age 65 follow a straightforward process. You decide what to withdraw for, gather documentation if needed, submit your request, your administrator reviews it, and they pay you. The main difference from earlier years is the tax treatment of non-medical withdrawals.
You decide on a withdrawal. It can be for a qualified medical expense or for any other reason. If it's medical, save your receipt and any supporting documentation. If it's non-medical, you just need to request the withdrawal.
You contact your HSA administrator. This is typically done through their online portal, by phone, or by mail. Tell them the amount and the purpose. Your administrator will ask for the documentation required for your withdrawal type.
You provide the required documentation. For medical expenses, submit a receipt, itemized statement, or letter of medical necessity if needed. For non-medical withdrawals, you typically only need to confirm your age and identity. Your administrator may ask for a copy of your ID or Social Security number to verify you are 65 or older.
Your administrator processes your request. They check your account balance, verify that you are age 65 or older (which eliminates the 20% penalty), and confirm your documentation. They approve the withdrawal and calculate the tax withholding if it's a non-medical withdrawal.
You receive your payment. Your administrator pays you by direct deposit or check. For non-medical withdrawals, they also issue Form 1099-SA to report the withdrawal on your taxes. You will report this income on your tax return.
The key change at 65 is that the 20% penalty tax disappears. Medical withdrawals stay completely tax-free. Non-medical withdrawals are taxed like regular income, but without the extra penalty. This makes HSA withdrawals much more flexible once you reach retirement age.
What the administrator asks for
Documentation requirements depend on whether you are withdrawing for a medical expense or another reason. At 65, the rules are simpler because the 20% penalty no longer applies.
For medical expenses
Your administrator needs proof of the medical expense. This is the same documentation required at any age: a receipt or invoice showing the date, amount, and type of expense. For expenses that require a letter of medical necessity (such as gym memberships, supplements, or certain equipment), submit the letter along with your receipt. With a letter, Burst handles this for you. Your administrator will verify that the expense meets the IRS definition of a qualified medical expense under Publication 502.
For non-medical withdrawals
If you withdraw for something other than medical expenses, your administrator simply needs to confirm that you are 65 or older. This may require a photo ID, Social Security number, or age verification through your account. The withdrawal is processed as a taxable distribution, and your administrator issues Form 1099-SA reporting the amount to the IRS. You will report this on your tax return.
Timing and tax reporting
Your administrator reports all HSA withdrawals on Form 1099-SA by January 31 of the following year. You must file Form 8889 with your Form 1040, 1040-SR, or 1040-NR if you (or your spouse, if married filing jointly) had any activity in your HSA during the year to claim the tax-free treatment on a qualified medical withdrawal. If it's a non-medical withdrawal, the amount is included in your taxable income for the year. Keep your own records of what the withdrawal was for in case the IRS asks.
Direct deposit versus check, and timing
Once your administrator approves your withdrawal, they send the money to you by your chosen method.
Direct deposit
Direct deposit is the fastest option. Your administrator transfers the approved amount to the bank account you have on file. This typically takes one to three business days. Make sure your banking information is current in your HSA account.
Check
If you prefer a check, your administrator mails it to you. Checks typically arrive within five to ten business days, depending on mail delivery in your area. This is slower than direct deposit but works if banking information is not available.
No invented timelines
The exact timing depends on your administrator's process and your plan document. Some administrators process withdrawals within days. Others take longer. Ask your administrator for their typical timeframe once you submit your request.
Denials: common reasons and how an appeal works
Your administrator can deny a withdrawal if they believe it does not meet the requirements. Denials are rare once you turn 65, because the 20% penalty no longer applies. However, your administrator may still question whether an expense is truly a qualified medical expense.
Common denial reasons
The receipt is missing or incomplete. Your administrator cannot approve a claim without documentation of what you bought and when.
The expense does not meet the IRS definition of a qualified medical expense. For example, general wellness, cosmetic procedures, or items like vitamins without a letter of medical necessity may be denied.
A required letter of medical necessity is missing. If the expense needs a letter but you did not provide one, the claim will be denied.
The expense was already reimbursed by insurance. You cannot get reimbursed twice for the same expense.
Incomplete documentation for age verification on a non-medical withdrawal. If your administrator cannot verify you are 65 or older, they may deny the request.
How an appeal works
If your administrator denies your withdrawal, they will send you a written denial explaining the reason. Your plan document includes appeal rights. You can appeal the denial by submitting additional documentation or a written explanation. For medical expenses, Burst can write an appeal letter explaining why the expense should be covered. Your administrator will review the appeal and issue a final decision. This is the plan's own appeal process, governed by the plan document and the rules your employer set up.
How Burst handles it for members
Burst files reimbursement claims on your behalf for HSA withdrawals at any age, including after 65. The process is the same whether you need a letter of medical necessity or you are making a straightforward withdrawal for a medical expense.
Burst writes and files your letter of medical necessity if the expense needs one. A licensed clinician reviews the request and decides whether it qualifies. The letter is dated on or before the purchase date, as required by the IRS.
Burst submits your claim to your HSA administrator with all required documentation. You do not file the claim yourself or submit documents directly.
If your administrator denies the claim, Burst writes an appeal letter on your behalf. The appeal cites the plan's own appeal rights and argues why the expense should be covered based on your documentation and the IRS rules.
Burst never touches your HSA money. Your administrator pays you directly out of your account by deposit or check. The refund guarantee applies: no letter, no charge. Claim denied, money back.
Getting it reimbursed with Burst
Burst handles the letter and the claim. You request the letter of medical necessity in about two minutes for $35, a licensed clinician reviews it, and it typically lands in your inbox within 24 hours. Burst files the reimbursement claim with your FSA, HSA or HRA administrator. The administrator pays you out of your account by deposit or check. No letter, no charge. Claim denied, money back. Request it before you buy, because the letter has to be dated on or before the purchase it covers.
Get reimbursed for my medical expense
Frequently asked questions
Can I withdraw from my HSA after 65 for anything?
At 65, you can withdraw for any reason without the 20% penalty. Medical expenses are tax-free. Non-medical withdrawals are subject to income tax but not the 20% penalty.
Do I have to spend my HSA by a certain age?
No. HSA money carries over year to year indefinitely with no deadline or withdrawal deadline at any age.
Can I use my HSA to pay Medicare premiums after 65?
Yes. You may not use HSA funds to pay for insurance, except for the following. Long-term care insurance. Health care continuation coverage (such as coverage under COBRA). Health care coverage while receiving unemployment compensation under federal or state law. Medicare and other health care coverage if you were 65 or older are the exceptions to the general rule that insurance premiums are not reimbursable.
What is Form 1099-SA?
Form 1099-SA reports HSA withdrawals to the IRS. Your administrator sends it to you by January 31 after the withdrawal year. You file it with your tax return.
Do I still need a letter of medical necessity after 65?
Yes, if the expense requires one. The age change eliminates the penalty, but it does not change which expenses qualify as medical. A gym membership still needs a letter. Prescription medications still do not.
What happens if my administrator denies my withdrawal at 65?
Your administrator must explain the denial in writing. You have appeal rights under your plan document. Burst can write the appeal for you, and your administrator will review it and make a final decision.
Keep reading: HSA Distributions and Withdrawals: The Rules, How HSA Reimbursement Works, HSA Benefits: What You Actually Get, HDHP and HSA: How the Pairing Works, and all guides on this topic.
Sources
IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (HSA withdrawal rules after 65, no 20% penalty after 65, tax-free treatment for medical expenses, taxable treatment for non-medical, insurance premium exceptions, carryover indefinitely)
IRS Publication 502, Medical and Dental Expenses (qualified medical expense definition, what expenses qualify)
IRS Form 8889 Instructions (tax-free reporting for qualified medical expense distributions)
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