I was researching the HSA distribution rules since I hope to open one soon. My plan of action has been like many others here and that is to build up HSA savings during the early years, let the investments grow tax free, and only spend them later when I am older -- even if I incur health expenses in the short term. One thing that occurred to me is that it is possible to oversave, especially if you start the account while you are young. While this is not a disaster (you can withdraw the money after age 65 and pay taxes on it like you do for a Traditional IRA), it is not optimal.
But it turns out that you can withdraw from an HSA for any allowable health expense since you opened the account, even if it was many years earlier. I am mentioning this to advise HSA account holders to SAVE ALL YOUR ELIGIBLE RECEIPTS FOREVER. You may be 68 years old and fortunate enough not to have used most of your HSA. But if you had saved receipts for expenses from previous years, you could pull out some or all of the money at any time for any reason and incur no tax liability.
According to Slide 31 on required documentation at:
http://www.treas.gov/offices/public-...SAs_040507.pdf
You need to save receipts and documentation that 1) prove the expense and 2) prove that the expense was not reimbursed by another source or taken as an itemized deduction on your tax return.
Reference: Q&A 39 at:
http://www.treas.gov/press/releases/...0450072304.pdf
 Quote:
Q-39. When must a distribution from an HSA be taken to pay or reimburse, on a taxfree basis, q ualified medical expenses incurred in the current year?
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A-39. An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established. Similarly, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Thus, there is no time limit on when the distribution must occur. However, to be excludable from the account beneficiary’s gross income, he or she must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses, that the qualified medical expenses have not been previously paid or reimbursed from another source and that the medical expenses have not been taken as an itemized deduction in any prior taxable year. See Notice 2004-2, Q&A 31 and also Notice 2004-25, for transition relief in calendar year 2004 for reimbursement of medical expenses incurred before opening an HSA.
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Kramer
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