I Contributed to a Health Savings Account Last Year and Still Have a Balance. How Can I Use the Money?

HSA funds can be used for a long list of out-of-pocket expenses, now and in the future

Sandra Block,

AARP

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Published March 06, 2026

Pete Ryan

First, congratulations on taking advantage of one of the most effective ways to lower your health care costs. At a time when the cost of health care continues to rise faster than inflation, consumers need all the help they can get.

A health savings account (HSA) allows you to put aside pre-tax money to pay for eligible medical expenses that aren’t covered or fully covered by insurance. To qualify for an HSA, you must first enroll in a high-deductible health insurance plan through your employer, or a high-deductible plan you purchase on your own if you’re self-employed.

In 2026, the IRS defines a high-deductible plan as one that has a deductible of at least $1,700 for self-only coverage and $3,400 for a family plan. If your plan meets or exceeds that threshold, you can contribute up to $4,400 to an individual plan or up to $8,750 for a plan that covers your family. If you’re 55 or older, you can contribute an additional $1,000 to either type of plan.

Contributions to an HSA are pre-tax if they’re deducted from your paycheck. Some employers will match contributions to an HSA, just as they do with contributions to a 401(k) plan. If you’re self-employed, you can open an HSA on your own and claim a tax deduction for your contributions.

Withdrawals from an HSA are tax-free as long as you use the money for eligible expenses, and the list of qualified expenses is comprehensive. In addition to co-payments, coinsurance and deductibles, you can use the funds for dental and vision appointments (as long as they’re not covered by your insurance), dentures, hearing aids and nonprescription drugs such as aspirin and cough medicine.

The One Big Beautiful Bill, enacted in July 2025, expanded the ways you can use an HSA. Starting this year, you can withdraw money to pay for a direct primary care (DPC) plan. These plans, offered by some primary care physicians and physician groups, provide unlimited access to their services for a monthly fee. Previously, the IRS said these arrangements were ineligible HSA expenses; now, you can withdraw funds to pay for them, as long as the monthly fee is less than $150 for individuals or $300 for families.

Unlike flexible spending accounts (FSAs) for health care, which also let you use pre-tax dollars to pay for out-of-pocket expenses, you don’t need to deplete your HSA by the end of the year to avoid forfeiting unused funds. You can roll the balance in your plan forward to cover future health care expenses, and if you leave your job, you can take your HSA with you.

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That feature makes an HSA a powerful savings tool. If you can afford to put money in your HSA — a move that may mean using other funds to pay for short-term expenses — you can create a pool of tax-free funds to cover a variety of health care costs in retirement. Fidelity Investments estimates that a 65-year-old retiring now can expect to spend $172,500 on health care costs in retirement.

Most HSAs allow you to invest a portion of your contributions in a portfolio of mutual funds, which could increase the amount you’ll have available when you retire. One strategy is to invest two to three years of routine medical expenses in a savings account; anything left over can be invested in mutual funds for your long-term goals.

Once you enroll in Medicare, you’re no longer allowed to contribute to an HSA. If you continue to work past age 65 and contribute to an HSA, you need to stop contributing six months before you apply for Medicare because Part A is retroactive for up to six months (but no earlier than your eligibility date). However, you can use funds you’ve stashed in your HSA to pay for Medicare Part B and Part D premiums, Medicare Advantage premiums, deductibles, co-pays, coinsurance and other expenses Medicare doesn’t cover.

When you turn 65, you can also begin using money in your HSA for nonqualified expenses without paying a 20 percent early withdrawal penalty, although you’ll still have to pay income taxes on the money. In that sense, an HSA works a lot like a traditional IRA and can provide a source of funds in an emergency.

Whatever you do, save your health care receipts. One of the other advantages of an HSA is that you can reimburse yourself — even months or years after you incur the expense — as long as you spend the money after you opened the account.

I contributed the maximum to an HSA for more than a decade, and now that I’m retired and enrolled in Medicare, I’m grateful that I have a way to pay for my dental expenses, which aren’t covered by my Medicare supplemental health insurance. I’m pretty sure I’m putting my dentist’s children through college, but despite bad youthful habits (Coca-Cola was my favorite breakfast drink) and some congenital dental issues, I still have all of my teeth — and I’m determined to keep them.

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Sandra Block has covered personal finance for more than two decades. She was a senior editor at Kiplinger Personal Finance and a reporter for USA TODAY. She is the coauthor of The Busy Family’s Guide to Money and Easy Ways to Lower Your Taxes: Simple Strategies Every Taxpayer Should Know.