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ABLE Accounts: Advancing Financial Wellness For Individuals With Disabilities

ABLE accounts allow individuals with disabilities to save money without losing government benefits.

It’s an age-old dilemma: an individual with a disability wants to work, but working can potentially jeopardize their eligibility for Social Security and Medicaid.

 

One solution lies in ABLE accounts, a special type of account that allows individuals with disabilities to save and invest for their future without losing essential government benefits.

 

Since they were introduced in 2014, ABLE accounts have become an important — but often overlooked — tool for promoting financial wellness and advancing the goal of meaningful gainful employment for individuals with disabilities.

 

Whether you’re directly involved in benefits planning or not, understanding ABLE accounts is essential for anyone in the disability service provider realm. And with the IRS increasing the amount individuals can save in ABLE accounts in 2024, we thought this would be the perfect opportunity to go over what ABLE accounts are, who is eligible, and why they’re an important tool for financial wellness.

What are ABLE accounts?

ABLE accounts, which stands for ‘Achieving a Better Life Experience’ accounts, are a special type of tax-advantaged savings and investment account that allows individuals with disabilities to save money for expenses like housing, transportation, and healthcare.

 

To understand what makes ABLE accounts special, we need to first back up a step and understand how government benefits like Social Security and Medicaid work. In order to remain eligible for these benefits, individuals can’t have more than $2,000 in assets. This asset limit is a huge problem for individuals who want to earn and save money from a job. 

 

That’s where ABLE accounts come in. “ABLE accounts allow people to save money without impacting their Social Security income or Medicaid eligibility,” explains Dawn Hale, Director of Ticket to Work & Benefits Counseling for supported employment provider Waters & Sims. ”This is a game changer for someone who wants to save for a car, down payment on a house or a security deposit for their own apartment, or plan for future healthcare expenses.”

“ABLE accounts allow people to save money without impacting their Social Security income or Medicaid eligibility."

Who is eligible to open an ABLE account?

Currently, ABLE accounts are available to individuals with a disability that began before the age of 26. This age limit will increase to 46 starting in 2026, empowering more individuals with disabilities to benefit from ABLE accounts and secure their financial futures. (Individuals can be older than the age limit at the time of opening an account, as long as their disability began before the age limit.) 

 

ABLE account programs are available in 47 states, making them accessible to a wide range of individuals. According to ISS Market Intelligence, there were over 158,000 ABLE accounts holding over $1.5 billion in assets as of September 2023.

What are the benefits of ABLE accounts?

ABLE accounts play a crucial role in promoting financial wellness and advancing the goal of meaningful employment for people with disabilities in several ways:

Earn and save money from a job

“ABLE accounts are a great way for individuals to set aside money for future expenses without jeopardizing their Social Security income or Medicaid eligibility,” says Hale. By accumulating assets in these accounts, individuals can establish a financial safety net, build wealth over time, and achieve greater financial stability. 

 

ABLE funds are tax-free if used for qualified expenses, making these accounts an attractive vehicle for long-term savings. And while there are annual contribution limits to ABLE accounts, these limits are relatively high. Individuals can save up to $18,000 per year, or a maximum of $100,000, without affecting their eligibility for SSI benefits. Individuals who are employed and do not contribute to a retirement plan can save even more in their ABLE accounts. 

 

“When we do benefits counseling with individuals, we always advise people who are eligible for an ABLE account to research the options and take advantage of the opportunity to save their hard-earned money,” says Hale.

Plan for the future

Money saved in ABLE accounts can be used to cover a wide range of disability-related costs, including healthcare, education, transportation, and housing. By saving money in an ABLE account, individuals can budget and plan for their future needs — including building emergency savings. 

 

“If financial experts suggest people have an emergency savings of 3-6 months of their earnings, why shouldn’t individuals with disabilities have the same opportunity?” Hale adds. “ABLE accounts give people that opportunity.”

“If financial experts suggest people have an emergency savings of 3-6 months of their earnings, why shouldn’t individuals with disabilities have the same opportunity? ABLE accounts give people that opportunity.”

Budget for housing, food, and independent living expenses

ABLE accounts provide individuals with disabilities the opportunity to save for housing-related expenses, including rent, mortgage payments, utilities — even food. Account holders can also use their savings for modifications that make their living space more accessible, such as building a ramp or renovating a bathroom. 

 

Additionally, ABLE funds can be used to cover the costs of hiring personal attendants or caregivers to assist with activities of daily living, such as bathing, dressing, meal preparation, and transportation. This allows individuals with disabilities to tailor their support services according to their needs and preferences.

Pursue education and career opportunities

ABLE account holders can also use their savings to cover certain education expenses, including tuition, books, and vocational training programs. By investing in education and training, individuals with disabilities can gain the skills and qualifications needed to secure competitive employment. This, in turn, can lead to more fulfilling career opportunities and greater financial independence.

 

Transitioning to and maintaining employment often involves additional expenses, such as transportation and assistive technology. ABLE savings can be used to cover these costs as well, enabling individuals to overcome barriers to employment and succeed in the workforce.

Gain financial independence

ABLE accounts are relatively easy to open and manage. Individuals can typically open an account online or through a paper application, and contributions can be made by the account owner, family members, friends, or even through payroll deductions.

 

Any eligible person with a disability can set up their own ABLE account without having to rely on a family member or caregiver to establish it for them. And, unlike a trust, individuals have control over their own funds. 

 

“Giving individuals with disabilities the opportunity to save money like their family members creates a sense of equity instead of inequality,” says Hale. 

Real-life example: ABLE accounts in action

Let’s use the example of Sarah, a 30-year-old woman with cerebral palsy who works part-time as a graphic designer. Sarah is determined to achieve financial independence and save for her future, so she decides to open an ABLE account to help her achieve her financial goals while maintaining her eligibility for government benefits.

 

First, Sarah uses funds from her account to cover tuition fees and transportation for a web design certification course. This helps her acquire new skills and increases her earning potential in the graphic design field. She also uses funds from her ABLE account to purchase assistive technology devices such as an ergonomic keyboard, voice recognition software, and adjustable desks, which help her work more effectively.

 

Sarah dreams of living independently, so she uses her ABLE account to save for a deposit on a wheelchair-accessible apartment. Once she moves in, she’ll be able to use her savings to cover each month’s rent and utilities. 

Your next steps

ABLE accounts serve as a powerful tool for promoting financial wellness and meaningful employment for people with disabilities. By empowering individuals to earn money and save for the future, ABLE accounts contribute to a more inclusive and equitable society where all individuals have the opportunity to thrive in the workforce and beyond.

 

To learn more about ABLE accounts, visit the ABLE National Resource Center

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