What is true if a 65-year-old HSA holder uses funds for a non-health expense?

When a 65-year-old Health Savings Account (HSA) holder uses funds for a non-health expense, the correct assertion is that there will be tax implications associated with that withdrawal. Although HSA funds can be used tax-free for qualified medical expenses, using them for non-health-related expenses triggers a tax liability.

At the age of 65, HSA holders have the advantage of not facing a penalty for non-qualified distributions, which is typically a 20% penalty for younger account holders. However, the amount withdrawn for non-health expenses is subject to ordinary income tax. This means that any funds taken out of the HSA for purposes other than qualified healthcare expenses will incur taxation at the individual's income tax rate.

The other potential outcomes associated with this scenario are not applicable. There is no penalty for the withdrawal at the age of 65, the funds are not lost but rather become taxable income, and while there are no penalties, taxes do indeed apply. Thus, the focus is on the tax implications of the withdrawal.