Understanding Able Account Investment Options and Their Benefits

Able accounts offer a range of investment options, including high-yield savings accounts and investment portfolios.

These options allow individuals to save and invest for disability expenses, medical emergencies, and other financial needs.

One key benefit of able account investment options is the potential for tax-free growth and withdrawals.

This means that earnings on investments can grow without being subject to taxes, and withdrawals can be made tax-free, providing a financial safety net for individuals with disabilities.

An ABLE account is a tax-advantaged savings account available to individuals diagnosed with significant disabilities before age 26.

Contributions can be made to the account by the beneficiary, friends, or family members.

The funds in the account, if invested, grow tax-free.

ABLE programs are run by individual states, which means there are differences between ABLE accounts in different states.

Four states - Idaho, North Dakota, South Dakota, and Wisconsin - don't have active ABLE programs.

Many states accept outside residents into their program, so you can open an ABLE account there regardless of where you live.

ABLE accounts allow folks the opportunity to take some control over their finances, as said by Miranda Kennedy, director of the ABLE National Resource Center.

You may use money in the account for any expenses related to your disability, including transportation, food, education, and housing.

As of the last quarter of 2023, there were 151,164 ABLE accounts with about $1.5 billion in assets, according to ISS Market Intelligence.

There are no specific types of ABLE accounts mentioned in the article, but rather a focus on the features and benefits of the accounts themselves.

You can open an ABLE account with a state program or an out-of-state provider. If you choose a state program, it may offer a state income tax deduction or credit for contributions.

ABLE accounts can be invested or held in cash, and cash funds deposited in an ABLE account through an FDIC-insured institution are covered by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

You can only have one ABLE account, and contributions to the account can be made by the disabled person or their friends or family members.

Here are some factors to consider when choosing an ABLE account:

The first $100,000 in an ABLE account is exempt from impacting eligibility for Supplemental Security Income (SSI).

To open an ABLE account, you must be receiving benefits under SSI and/or Social Security Disability Insurance (SSDI), or meet the Social Security Administration definition and criteria regarding significant functional limitations and have a letter of certification from a licensed physician.

The onset of the disability must have begun prior to age 26, although this will change to age 46 in January 2026.

You can only have one ABLE account at a time, but the money in the account can be used for disability expenses over the lifetime of the beneficiary.

ABLE account owners can make changes to their investments two times per year, just like with 529 savings plans.

Contributions to an ABLE account are not tax-deductible at the federal level, although some states may provide an income tax deduction for contributions made to an ABLE account.

The total amount of contributions in a single year may not exceed the Internal Revenue Service (IRS) annual gift tax exclusion amount.

Here are some examples of qualified disability expenses that can be paid for with money from an ABLE account:

The first $100,000 saved in an ABLE account is exempt from the $2,000 SSI individual resource limit, and beneficiaries will still receive Medicaid if the account exceeds $100,000.

To open an ABLE account, you can apply through an ABLE state program, with currently 49 programs available across the US, except in Idaho, North Dakota, South Dakota, and Wisconsin. You can use the ABLE National Resource Center's comparison tool to look at several state programs and find one that suits your needs.

There are no fees for opening an account, but some states may charge fees for managing the account. For example, Florida charges $5.00 for each additional check beyond two per month. You can also make electronic transfers to a bank account, which are free in some states, like Florida, but may incur fees in others.

You can start by looking at your own state's ABLE program, as it may offer a state income tax deduction or credit for contributions. Some states, like Ohio, allow electronic transfers, while others, like Tennessee, make all disbursements in the form of a paper check.

You can contribute up to $18,000 to an ABLE account in a single year, and this limit is subject to inflation adjustments each year.

The annual contribution limit is the same for all ABLE accounts, but state programs set lifetime contribution limits, and many exceed $500,000.

If you have a job and you and your employer are not contributing to a retirement plan, you can contribute more to an ABLE account, up to an amount equal to your annual gross salary or the federal poverty level, whichever is less.

The federal poverty level for 2024 is $14,580 in the continental United States, $16,770 in Hawaii, and $18,210 in Alaska.

You can make changes to your investments in an ABLE account two times per year, similar to 529 savings plans.

You can deposit an amount that's equal to your annual gross salary or an amount equal to the individual federal poverty level — whichever is less — if you have a job and you and your employer are not contributing to a retirement plan.

Here are some key details to keep in mind when considering how much to contribute to an ABLE account:

The money in an ABLE account can be used for disability expenses over the lifetime of the beneficiary, and the first $100,000 saved in an ABLE account is exempt from the $2,000 SSI individual resource limit.

To open an ABLE account, you need to apply through an ABLE state program. There are currently about 49 active programs available, with all states except Idaho, North Dakota, South Dakota, and Wisconsin having active programs.

You can compare state programs using the ABLE National Resource Center's comparison tool to find one that fits your individual situation. Some programs even accept non-residents.

Look at your home state's program first, as they may offer incentives and support for residents. Filling out the application online through the state ABLE program website is usually a straightforward process.

Tax advantages are a significant perk of ABLE accounts. Interest or dividends earned in an ABLE account are tax free, provided the funds are spent on qualifying expenses.

Some states offer tax deductions or credits for contributions made by state residents to an ABLE savings account. This can be a great incentive for those living in states that offer these benefits.

Investment options, such as those offered by various state ABLE plans, also grow tax free.

Having a decent amount of savings in an ABLE account can actually help preserve disability benefits. Money in the account does not impact Medicaid benefits and balances below $100,000 do not impact SSI benefits.

If you're currently receiving government assistance for housing or food, there's a limit to how much cash or savings you can have and still receive benefits - usually no more than $2,000.

The first $100,000 in your ABLE account won't count toward SSI eligibility. Any amount of ABLE savings up to the plan limit will not affect eligibility for various programs.

Here are some of the programs that won't be affected by your ABLE savings:

Having an ABLE account can be a game-changer for people with disabilities and their families. It offers a range of benefits that can help improve financial security and independence.

One of the key benefits is that it doesn't affect eligibility for certain government programs. This is because the first $100,000 in your ABLE account won't count toward Supplemental Security Income (SSI) eligibility, and any amount up to the plan limit won't affect eligibility for programs like Medicare, Medicaid, and federal housing assistance.

You can also use an ABLE account to save money without worrying about it counting against your benefits. The limit is usually no more than $2,000 in cash or a savings account if you're receiving government assistance for housing or food.

An ABLE account is also a great way to build an emergency fund, which can be a lifesaver in unexpected situations. For example, if your furnace breaks down in the middle of winter, you'll have money set aside to cover the $4,000 repair cost.

Here are some programs that won't be affected by your ABLE savings:

This means you can use your ABLE account to save for long-term goals, like education or a down payment on a house, without worrying about it affecting your government benefits.

Tax advantages of ABLE accounts are a significant perk for individuals with disabilities and their families.

Interest or dividends earned in an ABLE account are tax-free, provided the funds are spent on qualifying expenses.

Some states offer tax deductions or credits for contributions made by state residents to an ABLE savings account, which can help reduce the financial burden.

The funds within the account grow tax-free, which means you won't have to pay taxes on the investments or interest earned.

ABLE account owners can make changes to their investments two times per year, allowing them to adjust their investment strategy as needed.

Here are some examples of qualified disability expenses that are tax-free:

By taking advantage of these tax benefits, individuals with disabilities and their families can save and invest for the future without worrying about losing eligibility for public benefits.

Financial flexibility is a game-changer for people with disabilities. You can open and set up an ABLE account by yourself, making financial decisions independently.

The total amount of contributions in a single year may not exceed the IRS annual gift tax exclusion amount, which can vary from year to year. This means you can contribute a certain amount each year without worrying about tax implications.

ABLE accounts can be used as a type of emergency fund, which can be a huge stress-reliever. For example, if you have $4,000 saved in an ABLE account and your furnace breaks down, you'll have the funds to cover the repair.

You can hold a maximum of $235,000 to $550,000 in an ABLE account, depending on the state's limit. Only the first $100,000 is exempt from impacting eligibility for Supplemental Security Income (SSI).

You can make changes to your investments in an ABLE account two times per year, giving you flexibility to adjust your strategy as needed.