You’ve read about Health Savings Accounts and they sound like a great idea. The triple tax advantages, the fact that your money rolls over from year to year-- even the ability to use it as a retirement account sounds like opening an account is a no-brainer.

But how and when can you access your money should you need it?

Making an HSA withdrawal before age 65

If you’re under the age of 65, you can withdraw money from your HSA (i.e. take a distribution) to pay for qualified medical expenses. If you use your HSA contributions to pay for anything else, you will have to pay income taxes on the withdrawn amount as well as a 20% penalty.

Qualified medical expenses include (but aren’t limited to):

• Copays

• Coinsurance

• Deductibles

• COBRA

• Medicare premium

• Prescriptions

• Dental Care

• Eye Care

• Crutches

• Band-aids and other First Aid care

• Sunscreen

• Acupuncture

• Artificial limbs and teeth

• Chiropractic services

• Contact lenses and glasses

• Crutches

• Diagnostic devices for medical purposes

• Fertility enhancement

• Hearing aids

• Home health care

• Long-term care, including nursing homes

• Oxygen

• Pregnancy test kits

• Psychiatric and psychological care

• Special education

• Stop smoking programs

• Vasectomy (and reversal)

• Weight loss programs as a treatment for a medical condition

• Wheelchairs

• Incidental expenses for items like transportation, parking, meals, and hotels required for medical treatment

• You can use your HSA contributions to pay for these expenses for you and your dependents.

If you’re under the age of 65, here are some examples of what you can’t use your HSA for:

• Health insurance premiums (except COBRA and Medicare)

• Childcare

• Cosmetic and other elective surgery

• Diaper service

• Funeral expenses

• Hair transplants

• Health club dues

• Maternity clothes

• Non-prescription medications

• Nutritional supplements

• Teeth-whitening treatments

• Weight loss programs not required for medical care

These lists are not exhaustive. If you have questions about an expense you don’t see here, check out Lively’s list of eligible expenses, or reach out to your HR Department or HSA administrator.

Making an HSA withdrawal after 65

If you spend the money on qualified medical expenses it still comes out of your HSA tax-free. Just like when you were under the age of 65. If you spend the money on anything else, you pay income tax on the withdrawal but you’re not subject to the 20% penalty like you were when you were under the age of 65. That means upon turning 65, your HSA functions more like a traditional retirement account with these important exceptions:

• There are no minimum withdrawals at any age or at any time. Traditional retirement accounts like 401ks and IRAs require you to start taking a minimum monthly disbursement at age 72.

• HSA withdrawals for qualified medical expenses are free of income tax, while retirement account withdrawals for qualified medical expenses are subject to income tax.

• If you leave your HSA to your spouse, it becomes their HSA and functions the same. If you leave your account to someone else, they have to take the full disbursement and pay income taxes on the inherited amount.

How to withdraw funds from your HSA

Most HSAs provide you with a debit card, and some also supply checks, which can be used to pay doctors, pharmacies and vendors at the point of sale. You can also reimburse yourself the same way for expenses incurred out-of-pocket. Many HSAs also have online payment systems that let you pay bills directly from your account. Just be sure to keep detailed records for your tax return.

If your HSA doesn’t provide you with a debit card, you will need to pay for your expense first and get reimbursed later. To receive a reimbursement you will submit a receipt and any other required documentation to your HSA administrator. Your HSA administrator will then either mail you a check or deposit the appropriate amount into your checking or savings account.

How to withdraw funds from self-directed and other investment HSA

If you have an HSA that allows you to invest your contributions, like a self-directed HSA, then withdrawing funds from your account could be a one, two or three-step process, depending on how much cash you’ve left on reserve.

The way self-directed and other investment HSAs function, is that there are two separate accounts housed under the HSA umbrella. First, there’s your cash account. This is where you and your employer deposit contributions and from where you take your distributions. If you have a debit card you use to pay for your medical expenses, it will be tied to your cash account as well.

Then there’s your investment account. In order to buy investments with your contributions, you must move the money from your cash account to your investment account. Then you choose which investments to buy.

If you want to take a withdrawal from your HSA for a qualified medical expense, but it exceeds your account balance in your cash account to pay for said withdrawal, you’ll have to transfer money from your investment account into your cash account. If you don’t have enough in your investment account, you will have to sell some of your investments, then move the cash from the sales to your cash account.

Once the money has arrived in your cash account, you can use your debit card or submit receipts for reimbursement. This process could take a few days.

How to withdraw funds when you’re “no longer eligible"

In order to contribute to your HSA, the IRS requires you maintain a High Deductible Health Plan (HDHP). The IRS also requires that an HDHP is your only health coverage.

If you’re no longer eligible to contribute to your HSA because you’ve either purchased non-HDHP health insurance or supplemental coverage, or if you’re over the age of 65 or on Medicare, don’t worry. You’re still eligible to have an HSA account. And withdraw from said account. You just can’t add to it by making contributions.

If you want to add to your HSA but you’re no longer eligible to contribute, consider investing your contributions so they can grow at the rate of the market. If you want to withdraw from your HSA once you’re no longer eligible, you follow the same guidelines as you did when you were.

How to withdraw from one HSA to fund another

There are lots of reasons you could want to move your contributions from one HSA to another. The chief among them might be, your current HSA doesn’t allow you to invest your contributions and you’re looking for one that will. If you want to withdraw from one HSA to fund another you would initiate one of two things: a rollover or a transfer.

If you choose a rollover, the original HSA provider physically sends you a check or electronically transfers the funds to you. You then have to send the money to a new HSA provider within 60 days of receipt. You’re able to roll over your funds at least once in a 12-month period.

If you choose a transfer, you simply open a new HSA and request the original HSA to send the money directly to the new HSA. You don’t have to worry about physically getting the funds to the new HSA, the HSA administrators will handle it for you. There are no limits on how often you can transfer money from one HSA to another.

Are there limits to the number of withdrawals you can make?

No. You have unlimited access to your HSA. But a word of caution: there are limits to your contributions, which are set by the IRS each year and are different for individuals, families, and those over 55.

Withdrawing money from your HSA is a simple one, two or three step process, depending on the type of account and amount of cash reserves you have. If you have questions about how your specific HSA functions, reach out to your HR Department or your HSA administrator.

Click here to open a Lively HSA.