ABLE Accounts: Understanding the Savings Accounts for People with Disabilities

The Achieving a Better Life Experience (ABLE) Act took effect in 2014 to help individuals with disabilities save money in tax-advantaged accounts without jeopardizing their eligibility for public benefits.

How are ABLE Accounts Used?

ABLE accounts are savings and investment accounts specifically for individuals with disabilities. These accounts allow eligible individuals to save money for disability-related expenses without affecting their eligibility for federally funded benefits like Supplemental Security Income (SSI) and Medicaid.

Funds in ABLE accounts can be used for a wide range of qualified disability expenses (QDEs), which include but are not limited to:

Education- Tuition, books, and other educational materials.

Housing- Rent, utilities, and home improvements.

Transportation- Public transit, vehicle modifications, and maintenance.

Employment- Job training and support.

Health- Medical expenses, therapies, and equipment.

Basic Living Expenses- Food, clothing, and personal care items.

Additional Benefits

Tax-Free Earnings:
While contributions to ABLE accounts are not tax-deductible, the earnings on investments within the account grow tax-free. Distributions from the account are also tax-free, if they are used for qualified disability expenses.

Saver's Credit:
Eligible ABLE account beneficiaries may qualify for the Saver's Credit, which is a non-refundable tax credit for contributions made to the account.

Rollovers from 529 Plans:
Families can roll over funds from a 529 education savings plan to an ABLE account without incurring taxes. However, these rollovers count toward the annual contribution limit.

Limitations

While ABLE accounts offer significant benefits, there are some important limits and limitations to be aware of.

Eligibility:
To open an ABLE account, the individual must have a disability that began before age 26. However, this age limit will expand to 46 effective January 1, 2026. Additionally, the account can be open at any age, if the disability onset was before the aforementioned age.

Contribution Limits:
The 2025 annual contribution limit for ABLE accounts is $19,000. Moreover, if the beneficiary is working and does not participate in an employer-sponsored retirement plan, they can contribute an additional amount up to the federal poverty level for a one-person household.

Resource Limits:
Supplemental Security Income (SSI) does not consider up to $100,000 in an ABLE account as a countable resource. However, exceeding this limit may affect SSI benefits.

State Plan Limits:
Contribution and total amount limits can vary by state.

How to Enroll

1. Check Eligibility: Ensure the applying individual meets the eligibility criteria.
2. Gather Personal Information: You'll need the following details:

• Account owner's name
• Date of birth
• Mailing address
• Social Security number or Taxpayer Identification number
• Email address
• Identification type (e.g., driver's license or state-issued ID card)
• Bank routing and account numbers for initial deposit

3. Choose an ABLE Program: Select an ABLE program that best meets your needs. The ABLE National Resource Center offers tools to compare different programs.

Once you’ve chosen the ABLE program that best suits your needs, follow the instructions to complete the application. Folks can manage their accounts online, including making contributions, accessing funds, and tracking expenses.

Additional Considerations

Legal representatives can open accounts on behalf of individuals. Personal information of the representative along with the primary account owner will be needed for this process.

Lastly, the process does involve providing information about the primary disability that the account owner has. This may require including diagnosis codes and supporting documents.

The ABLE Act and ABLE accounts provide a valuable tool for individuals with disabilities to save and invest money for their future needs without losing access to essential public benefits. Understanding the eligibility criteria, contribution limits, and how to use these accounts effectively can help maximize their benefits and promote financial independence.

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Investment advice offered through OneDigital Investment Advisors.