All about ABLE programs that help people with disabilities save and invest

• All states except for Idaho, North Dakota, South Dakota, and Wisconsin have active ABLE programs.
• Some state programs only accept state residents; others permit anyone in the US to apply.
• You can generally choose to deposit funds into several types of savings or investment options.

An ABLE account is a tax-free savings account that lets people with disabilities manage their money without it affecting government assistance. To open an account, you'll have to apply through a state program.

Here's everything you need to know about setting up an ABLE Account and what to consider when selecting an ABLE program.

History of ABLE programs

Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014. The ABLE Act allows states to create ABLE programs where people with disabilities can open a tax-free account that can help pay for disability-related expenses. The law also specifies that the money deposited into these savings accounts would serve as a way to supplement — not replace — public benefits. Therefore, opening an ABLE Account wouldn't impact your eligibility for Medicaid or Social Security Income (SSI). 

The first ABLE program was launched in 2016. Currently, there are active state programs in every state except for Idaho, North Dakota, South Dakota, and Wisconsin.

How ABLE accounts work

ABLE accounts are specifically for people with disabilities. To be eligible, you must meet one of the following requirements:

• Qualify for SSI and had a disability or blindness before the age of 26
• Receive disability insurance benefits, childhood disability benefits, or disabled widow's benefits
• Have a disability certification, or your parent or guardian can verify that you had a disability before the age of 26

You may use money in an ABLE Account for any disability-related expenses, like housing, transportation, and basic living expenses. 

ABLE accounts can generally be opened through ABLE programs online. You'll have to be at least 18 years old to open an account. Parents or legal guardians can open an ABLE Account for children.

The application for an ABLE account is somewhat similar to when you open a bank account at a financial institution. It asks for basic information, like the account owner's birthdate, social security number, and address.

Most ABLE state programs also offer multiple savings and investment options. Typically, you'll have the ability to choose between a savings account or checking account, and a couple of investment portfolios of different risk tolerances. You can keep all your money in one type of account or select multiple options. You can also decide to make changes to your savings and investment options in the future.

Impact of using an ABLE account

An ABLE account is impactful for people with disabilities because it provides them an opportunity to save for the future without it impacting their ability for government assistance.

Nathan Turner, an NRC ABLE Account Ambassador, says that before opening an ABLE account through the Ohio ABLE Program, he found it challenging to save for emergencies or contribute money towards retirement because he was worried about losing eligibility for receiving Medicaid.

"I tried many saving strategies before I opened an ABLE account — a piggy bank, prepaid cards, and giving money to my circle of support to hold onto for me. None of those options gave me independent access to my own money or the opportunity to have my money grow in ways that people without disabilities, who are not reliant on public benefits, take for granted," adds Turner.

Since he opened an ABLE account, Turner says he's been able to save money for retirement, his first home, emergencies, and Medicaid premiums. 

Beverli Austin, another ABLE Account Ambassador, adds that having an ABLE account has been a stress reliever for her family because she doesn't have to worry about saving money and having it affect her son's current or future benefits for government assistance. For example, in order to qualify for SSI, you can only have $2,000 in your name.

"It just gives that breathing room. It just takes a load off when you're a parent trying to save for your child. You're not always worried about, 'did I hit that $2,000 limit?'" explains Austin. 

Austin says she wants to use the ABLE account as a way to help with her son's expenses throughout his lifetime, whether it be any medical costs that come up, or savings for higher education, or even retirement.

How to choose an ABLE program

If you live in a state that offers an ABLE program, experts recommend that you look at this program first. Some states have income tax deductions for contributions in an account. 

Matthew Ricks, CFP and president of Hay Stack Financial Planning, suggests that if you're comparing different ABLE state programs, you'll want to pay attention to account maximum limits. 

"If you're someone that's is going to be constantly funding your account, the account value is going to grow fairly quickly, says Ricks. "Knowing that account limit could be a factor."

Note: ABLE account state limits vary from $235,000 to $550,000. 

Ryan McGuire, CFP, senior consultant and director of Innovation at Oak Wealth Advisors, also recommends looking over the fees and account minimums for getting started. For most ABLE programs, a minimum of $25 is needed to open an account. Most accounts have an annual maintenance fee that you'll pay each quarter.

ABLE programs: Frequently asked questions

How much money can I contribute to an ABLE Account? 

The annual account contribution limit for an ABLE Account is $17,000 for 2023. If the account holder has a job and their employer isn't contributing to a retirement plan, they will also be able to contribute more money — $13,590 to $16,990 depending on which state they live in. 

Can you make changes to investment options in an ABLE Account?

Yes, usually you can change your investment options two times per year. 

Does an ABLE Account affect SSI?

An ABLE account won't affect your eligibility for Supplemental Security Income. You may keep up to $100,000 in an ABLE account, and that won't impact your eligibility to get SSI. 

Is my money protected in an ABLE Account?

Most ABLE State Programs offer a savings or checking account. If you choose to put your money in a bank account, your money is secure because it's protected by FDIC insurance. FDIC insurance covers up to $250,000 per depositor. If a bank shuts down, your money will be either moved into another insured institution, or you will receive a check for the money that was in your account. 

If you choose an investment portfolio in an ABLE Account, your money is not FDIC insured. Bear in mind that investing money involves risk and market conditions can fluctuate. Because the stock market is risky, experts generally don't advise investing money you'll need in the next five years. 

If you're comfortable taking more risk with your money to earn a higher return, then you may want to invest in the stock market. If you need access to your money for an emergency or a particular expense, a savings account will likely be a better place for keeping your money.

Where can I learn more about ABLE Accounts?

If you would like to learn more about ABLE Accounts, the ABLE National Resource Center has many resources and comprehensive guides. For example, you can compare state programs through the website's Three-State Comparison Tool or attend a virtual webinar about ABLE Accounts.