Tax-advantaged investment vehicles, known as ABLE accounts, offer an opportunity for those with disabilities to invest their funds.
ABLE accounts are a unique type of investment account designed to help individuals with disabilities save and invest money while maintaining eligibility for certain public benefits like SSI or Medicaid. Each state administers its own ABLE account program, similar to 529 education plans.
Eligibility and Disability Onset
To be eligible for an ABLE account, an individual must have a disability onset before age 26 (expanding to age 46 starting January 1, 2026). This means that the disability must have started before the individual turned 26 (or 46 in 2026). The individual must also have a significant disability certified by a physician or be receiving qualifying disability benefits, such as Supplemental Security Income (SSI) or Disability Insurance Benefits (DIB).
Investment Options and Fees
Investment options in ABLE accounts vary by state but generally include various portfolios allowing tax-free growth. Contributions are capped annually, with the limit set at $19,000 as of 2025. Some states allow higher maximum balances, though balances over $100,000 may affect SSI benefits.
Fund fees, or the costs automatically deducted from your funds by the investment company, are generally in the 0.25 to 0.50 percent range, for many states' plans. Some states may offer reduced fees for maintaining a specific account balance, enrolling in electronic statements, or residing in the state sponsoring the ABLE account.
Flexible Uses for Funds
Money in an ABLE account can be used broadly for disability-related expenses such as housing, transportation, education, therapies, and daily living costs. Examples of qualified disability expenses include education, housing, transportation, health care expenses, assistive technology, and daily living needs, including food.
Contributions and Management
Anyone can make contributions to an ABLE account, including the account holder, friends, family, an employer, or a Special Needs Trust. Investment accounts are managed by major investment companies, including BlackRock, Vanguard, and Charles Schwab, with Fifth Third Bank serving as the primary banking partner for ABLE accounts.
Comparing ABLE Programs
To help potential account holders make informed decisions, the ABLE National Resource Center provides a tool to select up to three states for a side-by-side comparison of multiple ABLE program features. The center also maintains an overview of each state's investment options and fees.
Tax Benefits and Inheritance Rules
Investing in an ABLE account offers tremendous tax benefits, with withdrawals used for qualified disability expenses being tax-free. However, it's worth considering what happens to money in your account after you pass away, as inheritance rules can be tricky.
In summary, ABLE accounts provide a valuable resource for individuals with disabilities, offering tax-advantaged savings and investment options with broad allowable expenses related to disability needs. To learn more about ABLE accounts in your state, visit the ABLE National Resource Center's website.
- Learning about personal finance and investing is crucial for managing an ABLE account effectively, as contributions, fees, and eligible uses for the funds require careful consideration.
- In addition to providing tax-free savings and investment opportunities for disability-related expenses, understanding inheritance rules associated with ABLE accounts is essential for long-term financial planning.
