ABLE Accounts: Seldom Discussed, Super Helpful
Lisa Whitley — Among the assortment of options for “specialized” savings accounts — for retirement, education, health expenses, dependent care — saving for the well-being of a disabled adult is often left behind in the discussion. The complexity of this savings goal derives from the fact that if a person is receiving a public benefit, such as Supplemental Social Security (SSI), Medicaid or other federal means-tested benefits, the amount of assets that they can hold is severely limited.
For example, SSI is a benefit for persons who have limited income and are disabled, blind or over the age of 65. As the law currently stands, an SSI recipient can only have $2,000 in savings ($3,000 if married). However, if this same person has savings within an ABLE (Achieving a Better Life Experience) account, they can save up to $100,000 without impacting their benefits.
Here are the basic facts you should know:
- A person can only have an ABLE account if they were disabled prior to their 26th birthday.
- A disabled person who does not receive SSI can still be eligible to have an ABLE account if s/he meets the age requirement and the criteria set for disability by the Social Security Administration.
- Contributions and earnings in an ABLE account are tax-advantaged in a similar way as a 529 education account: earnings are tax-free (if used for a qualified expense) and some states offer a tax deduction for contributions.
- Money in an ABLE account can be used for expenses such as education, housing, assistive technology, health care costs, etc.
- Similar to the 529 account, ABLE accounts are offered through states with a variety of investment options, including “plain vanilla” FDIC-insured savings accounts. (You can open an ABLE account in a state where you do not reside.)
- The annual contribution limit is $15,000 for contributions that come from persons other than the account holder, such as a family member or friends. If the account holder is working, s/he can also contribute up to $12,490 in 2020 (higher in Alaska and Hawaii).
You can learn more about ABLE accounts here. The ability to save money in an ABLE account can be a terrific way to help ensure that stability is a possibility for all members of our community.