The Achieving a Better Life Experience (ABLE) Act, signed into law in 2014, created a powerful savings tool for individuals with disabilities. ABLE accounts allow people with disabilities to save money without losing access to essential government benefits like SSI and Medicaid. Whether for daily expenses or future needs, these accounts can play a crucial role in achieving financial independence. In this blog I’ll explain what ABLE accounts are, how they work, and why they matter.
What is an ABLE Account and Why do You need it?
An ABLE account is a tax-advantaged savings account designed specifically for individuals with disabilities and their families. Many individuals with disabilities rely on public benefits such as SSI (Social Security Income) and Medicaid to meet their basic needs. These programs, however, impose strict asset limits—typically no more than $2,000 in savings—which forces individuals to stay impoverished to retain their benefits. An ABLE allows you to save and invest money that can be used for disability-related expenses without affecting eligibility for critical means-tested benefits like SSI, Medicaid, and other federal programs.
Example: Jane, a 25-year-old with cerebral palsy, relies on SSI. She recently received a $5,000 gift from her grandmother. Without an ABLE account, Jane would lose her SSI benefits because her total assets exceed $2,000. By placing this money in an ABLE account, Jane can save the funds without affecting her eligibility for SSI.
Who is Eligible to Open an ABLE Account?
To qualify for an ABLE account, it depends on when the disability began. To open an ABLE account, one must confirm under oath that their disability began before age 26, or provide proof of eligibility for SSI or SSDI before turning 26. Starting January 1, 2026, the age limit will be raised to 46, allowing those with disabilities that began before age 46 to qualify.
What Can ABLE Account Funds Be Used For?
Funds in an ABLE account must be used for “Qualified Disability Expenses” (QDEs). These expenses are broad and can include anything that enhances or maintains the health, independence, or quality of life of the person with a disability.
Qualified expenses include but are not limited to education, housing, transportation, health and wellness, assistive technology, legal fees, and funeral and burial expenses. If money is withdrawn and used for something that is not disability-related, then the earnings on the amount withdrawn are treated as income for tax purposes and the earnings are subject to 10% penalty.
How Much May be Contributed to an ABLE Account?
In Massachusetts, the ABLE program allows qualified individuals to save up to $18,000 annually without affecting their access to means-tested programs. An employed ABLE account owner who doesn’t participate in an employer-sponsored retirement plan can contribute an additional amount up to the lesser of a.) their compensation for the tax year, or b) an amount equal to the poverty level for one person household for the preceding year ($15,060 for 2024). The account can grow to $100,000 without impacting SSI and up to $500,000 without affecting Medicaid.
What Happens to the Funds After the Beneficiary’s Death?
One of the most important aspects of ABLE accounts is the Medicaid payback provision. Upon the beneficiary’s death, any remaining funds in the ABLE account may be used by the state to reimburse Medicaid for services provided to the beneficiary since the account was opened.
Example: If John, who had an ABLE account, passed away with $20,000 remaining in his account, the state could claim some or all of those funds to cover Medicaid expenses incurred during his lifetime. If John did not use Medicaid services, the payback rule does not apply, and the funds could pass to his designated beneficiaries.
Can Social Security or SSI Benefits Be Deposited into an ABLE Account?
Yes, Social Security and SSI benefits can be deposited into an ABLE account. However, it’s essential for a representative payee managing the funds to ensure that withdrawals comply with ABLE account rules and qualified expenses.
Why ABLE Accounts Matter
ABLE accounts provide a pathway to financial security for individuals with disabilities, offering a chance to save for the future without risking essential public support. They are an excellent complement to other planning tools, such as special needs trusts, providing a flexible and accessible way to manage funds for disability-related expenses.
Planning Tip: Families considering ABLE accounts should be mindful of contribution limits and potential Medicaid payback provisions. ABLE accounts should be viewed as part of a broader strategy to improve the quality of life for individuals with disabilities, alongside other estate planning tools.
ABLE accounts are more than just savings tools—they represent a critical step towards financial independence and empowerment for individuals with disabilities. By allowing beneficiaries to save and invest without jeopardizing essential government benefits, ABLE accounts open doors to greater financial freedom and a better quality of life. Whether you’re a person with a disability or a family member planning for a loved one’s future, understanding how to use an ABLE account can help you navigate the complex landscape of disability-related finances with confidence and peace of mind.