ABLE Accounts

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By Harshan Shanthakumar

There is a new type of savings account on the financial market and it’s one you should be “ABLE” to figure out. The federal ABLE Act, which was passed in 2014, made way for individuals with disabilities and their families to set aside $14,000 a year to be used for disability-related costs, including living expenses. ABLE stands for Achieving a Better Life Experience. An ABLE account provides a tax-advantaged method to save for disability-related expenses. The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age.

An ABLE account serves an important purpose in respect to the Investor Rights Clinic’s mission of representing under-served investors (particularly senior citizens): ABLE accounts help supplement individuals with disabilities and their families without losing the public benefits of SSI, Medicaid, and/or SNAP. Prior to this act, disabled individuals would lose out on these public program benefits in circumstances where they reported more than $2,000 in cash savings, retirement funds, and other items of significant value. The ABLE Act recognizes the extra, significant costs of living with a disability and does not affect eligibility for SSI, Medicaid, and other public benefits.

The ABLE Account is a great option to diversify your savings account vehicles; however, there are certain financial considerations to be aware of. Contributions to an ABLE Account are not tax deductible for federal income tax purposes but your investments can grow tax free and remain so when withdrawn and used for disability-related expenses. In addition, it is important to consider the fees and expenses; ABLE programs may charge account maintenance, asset management, or performance fees. Fortunately for Florida residents, there is no minimum dollar amount to open an ABLE account and no annual fee. Florida ABLE United is the program website for Florida residents. It is important to note that there are only 3 portfolio options: Vanguard, Florida PRIME, and Blackrock. If a broker-dealer suggests that you invest in an ABLE account and the account is not affiliated with either of the above 3 institutions, ask questions and remain cautious. Below is a list of questions that are helpful if you are considering opening an ABLE account:

  • What fees are charged by the plan?
  • Under what circumstances does the plan waive or reduce certain fees?
  • What is the minimum amount needed to open an account under the plan and what is the minimum for subsequent contributions?
  • Does the plan offer withdrawal methods such as checks, a debit card, or a recurring prescheduled withdrawal? What restrictions or fees apply to withdrawals?
  • What types of investment or savings options are offered by the plan? How long are contributions held before being invested or available for withdrawal?
  • Does my state’s plan offer tax advantages or other benefits for investment in the plan it sponsors?
  • How have investment options under the plan performed in the past, knowing that historical results are not indicative of future performance?