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Savings Plans For People With Disabilities

Program mimics tax-free college funds

ABLE Accounts - Saving plans for people with disabilities


ABLE accounts will allow families to set aside $14,000 per person every year.

Next year, states will begin offering an investment account for people with disabilities, similar to the popular 529 college savings plans.

Achieving a Better Life Experience (ABLE) accounts — sometimes called 529As — will allow those with disabilities and their families to invest money and withdraw it later, tax-free, for expenses such as housing, education, transportation, health care and employment training. A key component: Having the money won't disqualify the beneficiary from valuable federal benefits, such as Medicaid.

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A year ago, the federal government gave the green light to ABLE accounts, and since then more than 30 states have passed legislation to establish them. Pennsylvania, Ohio, Florida, Virginia and Nebraska are among those expected to launch ABLE accounts next year.

People with disabilities generally become ineligible for federal benefits if they have more than $2,000 in personal savings. They often live in chronic poverty to make sure they don't jeopardize their benefits, says Christopher Rodriguez with the National Disability Institute.

An ABLE account will allow tax-free withdrawals for a wide range of qualified expenses. If the money is used for other purposes, though, the earnings will be taxed as regular income and assessed a 10 percent penalty.

ABLE accounts will have other restrictions. The beneficiary's disability must have begun before age 26, and combined yearly contributions from the beneficiary and others can't exceed the annual gift tax exclusion, now at $14,000. After the beneficiary dies, states can claim any money remaining in the account to recover expenses paid by Medicaid. ABLE account features such as contribution limits will vary across the country.

Also, for now, people can't transfer money from a 529 college fund into an ABLE account.

Still, many praised the new accounts. "For families, it's a game changer," says Sara Hart Weir, president of the National Down Syndrome Society.

To read any updates on ABLE accounts, go to