[panopticon]

After 65+ you can withdraw the funds for any reason without penalty. The so "prevailing wisdom" seems to be to not use the HSA for medical expenses and cover those with after-tax money so your HSA can continue to grow.

Of course, this is predicated on being able to cover medical expenses without your HSA.

[ip26]

At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense. Withdrawals made for other purposes will be subject to ordinary income taxes. -- https://www.wellesley.edu/sites/default/files/assets/departm...

You don't have to withdraw funds from the HSA at time of billing, however. If you spend $1,000 at the ER today, you can take those $1,000 out twenty years from now.

[panopticon]

I was responding specifically to your "otherwise you lose the tax advantage" bit, which is still false. The money still grows with the same tax-advantage as a traditional IRA/401k.

Spending the money on medical expenses at 65 will maximize the value (this actually isn't universally true because IRA/401ks have required minimum distributions which can make holding onto the HSA more valuable), but you still get tax benefits by not covering medical expenses with it as long as you wait until 65+.

I also realized that I meant to say "not use your HSA for any medical expenses pre age 65" in my original comment. Sorry for any confusion.