ABLE Basics

Written by Anita Kelley on 1/03/2022

ABLE Accounts are a great vehicle for grandparents and family members to save for their loved ones!

“What a bargain grandchildren are! I give them my loose change, and they give me a million dollars’ worth of please “
- Gene Perret

What is ABLE?

The ABLE ACT (Achieving a Better Life Experience) was signed into law in December of 2014. It amended Section 529 of the Internal Revenue Code to create tax-free savings accounts for individuals with disabilities. ABLE allows individuals with a disability to save tax deferred without impacting resource-based benefits such as SSI, SSDI, or Medicaid.

Who can open an ABLE account?

An eligible person is one who experienced the disability prior to age 26. There is no age limit on how old the person is when they open the account, as long as the disability occurred prior to age of 26. It this criteria is met and the person is entitled to receive SSI or SSDI or they have certification from a physician indicating that he or she has a marked or severe functional limitation that is expected to last grater than 12 months, they are eligible for an ABLE account.

How do ABLE accounts work?

ABLE accounts are limited to $15,000 in annual contributions unless the individual is working and not contributing to a retirement plan. Accounts can have up to $100,000 in balances without impacting SSI or SSDI and these funds will not affect Medicaid. If the individual is not receiving SSI or SSDI, they can save more than the 100,000 (amount depends on what state plan you open).

Funds in ABLE accounts grow tax deferred and withdrawals are tax free if used for Qualified Disability Expenses (QDEs). QDEs include:

  • Healthcare

  • Transportation

  • Housing

  • Personal Support Services

  • Assistive Technology

  • Financial Management and Legal Fees

  • End of Life Expenses

  • Other Expenses to enhance the account owner’s quality of life

Alabama ABLE Savings Plan

The Alabama ABLE Savings Plan has a low annual fee of $35.00 and is administered by the State of Alabama Treasurer’s Office. Contributions into the account can be deposited into an FDIC savings account or three Vanguard funds. Contributions may also be deductible for Alabama residents up to $5000.00 per filer on their state income tax.

More Information….

As 3/31/2021, 44 states and D.C. have ABLE Programs. Nationwide, 101,000 accounts have been opened, with an average savings in each account of $8,600 and a total amount of $874 million dollars. Several states offer some type of tax incentive for their residents, so check with your own state’s plan when deciding which plan to open.

Anita Kelley

Alabama ABLE Savings Plan Director