One type of savings account that you may not have heard of in the past is called an ABLE account. This account is very important for the disabled. Why? It allows you to save funds beyond what you’d normally be able to have and still qualify for benefits.
ABLE accounts are state-sponsored accounts. They are tax-advantaged savings accounts that those with disabilities can use to save up to $100,000 without the risk of losing important government benefits.
What’s surprising about ABLE accounts is that fewer than 1% of those who could have these accounts do. After all, many people and families caring for people with disabilities have been told not to save too much, as it could impact the ability to qualify for benefits.
Congress passed the Achieving a Better Life Experience Act, or ABLE, in December 2014. This act created the tax-advantaged, state-sponsored savings program that is available today. It took around two years to start rolling out the plans, so this is still a relatively new development.
Individuals with disabilities and their families are able to contribute up to $15,000 each year to the account. The limit may be higher for those who don’t have a 401(k) or retirement program at work (or choose not to participate in it). Beneficially, both qualified withdrawals and earnings growth in ABLE accounts are tax-free.
It’s believed that around 8 million people could qualify for ABLE accounts, but only 46,000 had one as of June 2019. If you are interested in this account or want to learn more about it, reach out to your attorney.