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ABLE Accounts: Relief for Those with Disabilities

| October 31, 2019

Living with a disability can take a very difficult toll. The statistics are stark – 1 in 4 people in the United States have some form of disability, including impairments with vision, hearing, mobility, and cognition. This can have numerous effects both emotionally, but more pertinent to this discussion, financially.[1]These individuals have difficulties working. For instance, in 2016, 77 percent of people in the US without a disability were employed full-time or part-time, but only 36 percent of people with disabilities were employed.[2]People with disabilities in the US who were age 16 and over earned a median income of $22,047 in 2016, significantly lower than the median income of $32,497 for people without disabilities.[3] On top of the impact to income, there is also the financial healthcare costs: One in three adults between the ages of 18 and 44 with disabilities have an unmet healthcare need because of cost in the past year.

To help the disabled, the government passed the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, better known as the ABLE Act. In this article, we will discuss the benefits of this Act, and how those in need can take advantage of its parameters.

ABLE Eligibility

Before we get into the benefits of the Act, we will first explore eligibility. The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If you meet this age requirement and are also receiving benefits under SSI and/or SSDI, you are automatically eligible to establish an ABLE account.

If you are not a recipient of SSI and/or SSDI but still meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician. You do not have to be younger than age 26 to be eligible for an ABLE account. You can be over the age of 26 but must have had an age of onset before your 26th birthday.

There is no proof of eligibility to open an account. However, you should maintain a record of your diagnosis, benefits verification letter or other relevant documents in the event that you are required to prove eligibility at a later time.

ABLE Benefits

The ABLE account provides several benefits to its owner. The account owner may contribute up to $15,000, post tax. An additional contribution may be made equivalent to the federal poverty level for a one-person household (in your state of residence) or the account owner's gross wages, whichever is less (so long as the filer is not participating in an employer-sponsored retirement plan). The account works similar to a Roth IRA on the federal level – the contributions are made with after tax dollars, grow tax-deferred, and so long as the withdrawals are used for qualified disability expenses, the withdrawals are tax free (essentially meaning that any growth of the account is not taxed). At the state level, there may be some additional tax benefits. For instance, if you open an ABLE account in Illinois, you will receive the above benefits AND also be able to receive an upfront deduction of up to $10,000 for individual filers or up to $20,000 for joint filers for your contributions. It is thus VERY important that you check the benefits for your specific state before opening another state’s account.

The ABLE account is invested no different than a typical tax advantaged account – you may invest in a variety of mutual funds across the gamut of risk profiles (stocks, bonds, etc.).

 You will not lose, or lose eligibility for, federal benefits including SSI, SSDI, Medicaid, and HUD. If you are an SSI recipient, you can save up to $100,000 in your Illinois ABLE account and still receive your monthly SSI benefits. At $100,000, SSI benefits are temporarily suspended until the account balance falls below $100,000, and benefits resume. Account owners will not have to reapply for SSI benefits. Even if the ABLE account exceeds $100,000, beneficiaries will not lose Medicaid benefits.

There is even a provision that allows a rollover from a 529 College Savings Plan into an ABLE account for the same beneficiary or for a member of the family of the 529 College Savings account beneficiary.

How Do I Apply?

The application process for an ABLE account is quite simple (this may vary state by state). You need to visit and click on your state. For Illinois, they will gather some rather basic information to verify your identity (address, SS number, birthdate, etc.), you will choose the most appropriate investment option, and you will provide your banking information to schedule a transfer.

For those with disabilities, the ABLE account can provide some (albeit small) financial relief and additional savings for retirement.

[1] Prevalence of Disabilities and Health Care Access by Disability Status and Type Among Adults — United States, Weekly / August 17, 2018 / 67(32);882–887

[2] 2017 Disabilities Annual Report, A Publication of the Rehabilitation Research and Training Center on Disability Statistics and Demographics

[3] Id.

Karen DeRose and Anthony DeRose are registered representatives of Lincoln Financial Advisors.

Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies. DeRose Financial Planning Group is not an affiliate of Lincoln Financial Advisors.