Despite the long-term tax benefits, many individuals still utilize the accounts for ongoing medical expenses before retirement due to the high cost of health care.
If you can pay for ongoing medical expenses from cash reserves and leave funds in the account to grow, the HSA can be used to build a pool of funds for health care costs in retirement that are, if properly utilized, never taxed.
With open enrollment around the corner, it may be worth a revisit of your anticipated health care needs and insurance options to determine if a high-deductible health plan and HSA combo is appropriate.
Distributions not used for qualified medical expenses before age 65 would incur penalties. Once you reach age 65, you can access the account for any reason; however, distributions used for expenses other than qualified medical expenses are taxed as ordinary income, like IRA distributions.
When investing funds in the account, you must consider your risk tolerance and time horizon to access the funds, as you will be exposing the account to investment risks.
While this still affords you a tax benefit due to contribution deductions, you are shortchanging the potential tax benefits.