An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account designed to help individuals with disabilities and their families manage the high costs of living with a disability. Established under the ABLE Act of 2014, these accounts allow for tax-free growth and withdrawals for qualified disability expenses.

Eligibility and Requirements

ABLE accounts are available to individuals who meet the following criteria:

• The individual must have a significant disability that began before age 26 (effective January 1, 2026, this age limit will increase to 46).
• If receiving SSDI or SSI benefits, the individual is automatically eligible.
• If not receiving SSDI or SSI, eligibility can still be met by:
  • Meeting Social Security's criteria for functional limitations.
  • Providing a disability certification letter from a licensed physician or other approved medical professionals.

ABLE accounts are managed at the state level, not by the federal government. Beneficiaries, family, and friends can make contributions. The 2023 annual contribution limit is $17,000, which aligns with the federal gift tax exemption.

Benefits and Features

An ABLE account offers numerous advantages, including:

• Tax-Free Growth: Earnings in the account grow tax-free and can be withdrawn tax-free when used for qualified expenses.
• Flexible Spending: Funds can be used for qualified disability expenses such as:
  • Food and housing
  • Transportation
  • Education
  • Healthcare
  • Employment training
  • Assistive technology
  • Personal support services
  • Other expenses that enhance health, independence, and quality of life
• Nationwide Availability: Individuals can open an ABLE account in any state program that accepts out-of-state residents.
• Investment Options: Similar to 529 plans, ABLE accounts offer savings and investment opportunities tailored to individual risk tolerance and future financial goals. Investment strategies can be adjusted up to twice per year.

Considerations

When choosing an ABLE account, keep the following factors in mind:

• Account Opening: Check the documentation requirements, fees, and minimum contribution needed to open and maintain the account.
• Account Maintenance: Assess account fees and whether fee reductions are available for leaving funds invested over time. Confirm any limits on the number of withdrawals allowed.
• Investment Opportunities: Review the investment options offered by the account and consider their potential for growth and alignment with your financial goals.
• State-Specific Benefits: Determine if your state offers additional benefits, such as state income tax deductions for contributions or debit card access for purchases.

Final Thoughts

ABLE accounts are a powerful financial tool for individuals with disabilities and their families, offering tax advantages, flexible spending options, and investment opportunities. Whether used for everyday expenses or to save for the future, ABLE accounts provide a pathway to greater financial independence and security. Before opening an account, research state programs to find one that best suits your needs and long-term goals.