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ABLE Accounts Give Help for People With Disabilities

Save up to $100,000 without reducing government assistance

savings accounts for people with disabilities illustrated by wood model figures, coins and a piggy bank
iStock / Getty Images

If you have a child or grandchild with disabilities, one of your biggest worries is what will happen when you are no longer around to provide aid. For many people, the answer is an Achieving a Better Life Experience (ABLE) account. The accounts let those with disabilities set aside extra money without interfering with their federal aid.

All but four states — Idaho, North Dakota, South Dakota and Wisconsin — provide ABLE accounts, which are aimed at alleviating poverty for people with disabilities. Some states, such as California and Pennsylvania, allow people from other states to invest in their ABLE program. 

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Account owners can invest their money and shield earnings from taxes. Withdrawals are tax-free, provided the money is spent on approved expenses related to the account owner’s condition. And much or all of the money in an ABLE account does not count against asset limits that affect eligibility for safety net programs such as Medicaid and Supplemental Security Income (SSI).

“As long as you understand the limitations and benefits, they work really well,” says Charlie Massimo, senior vice president and financial adviser at Wealth Enhancement Group.

How it works

ABLE accounts were established by the same law that created 529 college savings plans. To be eligible, you must have a disability that began by the time you reached age 26 and, in most cases, be receiving SSI benefits or Social Security Disability Insurance (SSDI). 

If you have reached the age requirement but aren’t getting SSI or SSDI benefits, you may be able to open an ABLE account if you meet Social Security’s disability definitions and criteria and can get a letter of disability from a doctor certifying your condition.

A person with disabilities can have only one ABLE account, but anyone can contribute to it. The maximum contribution in 2023 is $17,000, but those who can work can contribute an additional amount up to their annual gross salary or the individual Federal Poverty Level (FPL). For an individual, the FPL in 2023 is $13,590. In some states, such as Ohio, contributions are deductible from state income taxes.

You can keep $235,000 to $550,000 in an ABLE account, depending on state limits. If you have more than $100,000 in an ABLE account, the excess could cause your SSI to be suspended, assuming you had the $2,000 limit in other accounts. Your SSI can be reinstated if your assets fall below the cap. The $100,000 ABLE limit does not apply to benefits from Medicaid or the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. 

Without an ABLE account, many people with disabilities face a choice between building savings and keeping their benefits. If the ABLE money is spent on a “qualified disability expense,” such as food, housing, transportation and other things that help improve health, independence or quality of life, withdrawals are free from federal and state taxes.

When the ABLE account owner dies, their estate can use the funds to pay any qualified disability expenses as well as funeral and burial costs. The state may file a claim on the account equal to the amount the state spent on the individual’s Medicaid program. Any amount remaining passes to the owner’s estate. 

Investing in the account

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ABLE accounts typically have five to six investment options, which account holders or their authorized legal representative may use as they see fit. By law, they may change how their investments are allocated only twice a year. The New York state ABLE plan, for example, offers four investment options run by mutual fund behemoth Vanguard, ranging from conservative to aggressive, along with a checking account.

There’s usually little or no cost to set up an ABLE plan, but there typically are fees for managing the money in an ABLE account. These are usually minimal, compared with typical mutual fund fees. New York’s plan charges 0.4 percent of the money invested in each investment option, $2 a month for the checking option, $11.25 per quarter for electronic statements and $13.75 per quarter for paper statements. Fees make a difference in your investment returns: Every dollar you give to the management of the ABLE account is a dollar you can’t use.

Some people may have conditions so severe that they cannot manage or open an ABLE account. “If you can’t do this yourself, you need a guardian to open it on your behalf,” Massimo says. “So it's really [important to have] the guardian understand the benefits of this plan.”

Finding the right plan

Because each state’s plan can be different, you may want to look at the ABLE accounts offered by other states. Most ABLE programs allow out-of-state residents to open accounts. (You can change ABLE account providers, but you can’t have more than one account at a time).

Several states offer state income tax deductions for in-state residents who make contributions to an ABLE account. The nonprofit ABLE National Resource Center offers an online tool that lets you compare up to three states’ offerings at a time.

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