ABLE Accounts

By Alisa Radut, IAC Student Intern Spring 2018

In thinking about investing for future retirement, you may need to consider savings to provide for disability-related expenses.  One type of account serves exactly this purpose: the Achieving a Better Life Experience (ABLE) account.  An account can be created for a beneficiary, including by a parent, guardian, or holder of a power of attorney.  Accounts are available to beneficiaries who incurred a qualifying disability before the age of 26.  The amount you can contribute to this account is currently limited to $15,000 per year and is subject to an aggregate limit.

An ABLE account offers several different investment options, including mutual funds and money market funds.  As with any investment, among the things you should consider when deciding what level of risk to sustain in the investment is how soon you will need the funds.  You should also take into account fees and expenses associated with the investment.  Although, you can change your allocation of assets in the account depending on your goals throughout the investment, federal regulations limit changes to investment selections to twice a year.

The ABLE account also provides special tax benefits.  Contributions are not tax free, but the growth on the investments are not subject to federal (and sometimes state) income taxes as long as the withdrawals are used for qualifying disability-related expenses.  Many states already have ABLE programs in place.  Know what your state has to offer for this type of account in order to maximize your benefits.  In some states, an ABLE account may impact your eligibility for other benefits, such as Supplemental Security Income (click here for IRS information about tax implications of ABLE accounts).  Offering circulars for ABLE accounts, offered on publicly available websites such as Able National Resource Center, describe the account and provide more information.  The SEC also provides a list of questions to help determine what ABLE plan may be best for you.