Financial Freedom for Disabilities: An Introduction to ABLE Accounts

An ABLE account, or an Achieving a Better Life Experience account, is a tax-advantaged savings account specifically designed to help individuals with disabilities and their families save and invest money for disability-related expenses while maintaining eligibility for government assistance programs. ABLE accounts were created as a result of the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act in 2014. Here's an introduction to ABLE accounts and how they contribute to financial freedom for individuals with disabilities:

Key Features of ABLE Accounts:

1. Eligibility:

   • ABLE accounts are available to individuals who became disabled before the age of 26, and they must meet the criteria for significant functional limitations. Eligibility is not limited to a specific disability or diagnosis.

2. Tax-Advantaged Savings:

   • Contributions to ABLE accounts are made with after-tax dollars, but the earnings and withdrawals are tax-free, as long as the funds are used for qualified disability-related expenses.

3. Contributions:

   • Annual contributions to an ABLE account are subject to an annual limit, which is set by each state and can change annually. These limits are relatively high and can be funded by the account beneficiary, family members, or others who wish to contribute.

4. Qualified Expenses:

   • Funds in an ABLE account can be used for various disability-related expenses, such as education, housing, transportation, healthcare, assistive technology, and more. The IRS provides a list of qualified expenses.

5. Supplemental Security Income (SSI) and Medicaid Protection:

   • ABLE accounts allow individuals with disabilities to maintain eligibility for government assistance programs like SSI and Medicaid while having a financial safety net.

6. State-Administered:

   • ABLE accounts are typically administered by individual states. Each state has its own program with unique features, fees, and investment options. You do not need to open an account in your own state; you can choose any state's program that suits your needs.

Benefits of ABLE Accounts:

1. Financial Independence: ABLE accounts empower individuals with disabilities to save and manage their own money, fostering financial independence and self-determination.

2. Tax Advantages: Tax-free growth and withdrawals provide an advantage when compared to regular savings or investment accounts.

3. Asset Protection: Protects eligibility for means-tested government assistance programs like SSI and Medicaid, which typically have strict income and asset limits.

4. Family Support: Family members can contribute to an ABLE account to help their loved ones with disabilities without negatively affecting their benefits.

5. Diverse Use of Funds: The funds in an ABLE account can be used for a wide range of disability-related expenses, providing flexibility to meet various needs.

6. Ease of Management: Account management is typically user-friendly, with online access to monitor balances and transactions.

ABLE accounts can be a powerful tool for individuals with disabilities and their families to save and invest for the future while preserving access to vital government assistance programs. However, it's important to compare the features and fees of different state programs and choose the one that best aligns with your financial goals and needs.