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For individuals with disabilities, a valuable option for saving money might be overlooked. ABLE savings accounts enable people with disabilities to save for their future financial needs—without jeopardizing eligibility for government benefits like Medicaid.
Introduced in 2014 under the Achieving a Better Life Experience Act (ABLE), these accounts became accessible to the public in 2016. According to the New York Times, ABLE accounts are now available in 41 states and Washington, D.C. Despite this, enrollment remains relatively low with only about 40,000 participants, while the National Disability Institute estimates that up to eight million individuals could qualify for ABLE accounts.
Previously, having assets or savings exceeding $2,000 would disqualify you from Medicaid or Supplemental Security Income, as reported by The Times. Here’s Ann Carrns of the Times explaining this issue:
Money placed in an ABLE account...doesn’t contribute to the total asset limit. This allows individuals with disabilities to save for future expenses or use the funds for current needs related to their disability, such as health care, housing, transportation, education, and training, without affecting their eligibility for government assistance.
In April, the Department of Housing and Urban Development issued a notice clarifying that ABLE funds will not impact eligibility for housing assistance.
Who qualifies for an ABLE savings account?
Each state has its own rules, but generally, you must have become disabled before the age of 26 to qualify for an ABLE account. Congress is considering extending the age limit to 46.
You can contribute up to $15,000 annually to an ABLE account. If you're employed, state regulations may allow you to contribute as much as $27,000 per year. Additionally, if you have a 529 college savings account, you can transfer those funds into an ABLE account, provided the transfer stays below the annual contribution cap.
You have the option to invest your ABLE funds in mutual funds or other investment vehicles, keep them in a regular savings account, or manage a checking account with a linked debit card. Some states allow individuals who do not reside there to open an account, although your home state might provide tax benefits for contributions made to ABLE accounts.
A key point to remember: If you pass away, the state may file a claim against your ABLE account to recover some or all of the funds to cover Medicaid expenses.
The National Disability Institute oversees the ABLE National Resource Center, where you can compare different state programs and find out how to enroll.
