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Who can participate in an HSA?

To be eligible for this nifty tax-advantaged plan you must also be enrolled in a High Deductible Health Plan (HDHP). Translation: Your health insurance plan - whether you have a plan through work or on your own - must have an annual deductible of at least $1,100 for an individual and $2,200 for a family. You can tap the HSA to pay for your deductible if you don't want to cover those costs out of your own pocket. Your HDHP might also carry a higher maximum annual out-of-pocket limit than you would have on a "regular" plan. In 2010 the max you would pay in medical costs if you hold an HDHP is $5,950 for an individual and $11,900 for a family plan.

If you can handle the higher deductible and higher annual max, the combination of a high-deductible health plan and an HSA can help you to build up savings to cover the inevitable out-of-pocket health care expenses you're likely to run into during retirement.

But these aren't the only things to consider when deciding whether an HSA is for you. HSAs with high deductibles are generally best for people who are young and healthy. If you're older and in poor health, getting an HSA is probably not a great idea.