On Jan. 1, millions of Americans became eligible to open an ABLE account.
These little-known accounts allow people with disabilities to build up savings with significant tax advantages. They’ve been around for a decade, but you had to be diagnosed with a disability that began before you turned 26 to be eligible. A law that went into effect this year raises that age to 46.
That means 14 million Americans are now eligible, up from 8 million, according to the National Disability Institute, a research and advocacy group.
Justine Chichester is one of them. In 2014, Chichester, then 39, slipped and fell on the sidewalk outside her home while walking her dog on a rainy afternoon in Miami. “My legs went over my head, and boom, I landed right on my tailbone,” Chichester told Yahoo Finance. “It was one of those freak accidents.” She has been paralyzed from the waist down ever since.
Thanks to the new law, Chichester opened her ABLE United account this week.
“It’s going to be a game changer for my finances,” she said. “I’ve struggled with many things since my spinal cord injury. One of the biggest things is finances due to the cost of living with a disability. All of the expenses that come with our everyday lives can really add up and make an already challenging life that much more difficult to live and to save.”
Justine Chichester (pictured) opened her ABLE account this week. “It’s going to be a game changer for my finances,” she said. (Photo courtesy of Justine Chichester)
ABLE accounts enable people with disabilities to save and invest with after-tax funds, but the money comes out tax-free (similar to a Roth account) when spent on disability-related needs, such as housing, groceries, healthcare, or education. Plus, it’s not considered income by any public benefit programs.
“We’re almost doubling the number of people that can now have an ABLE account,” said Juliana Crist, head of ABLE programs at Vestwell, which administers accounts in 19 states. “This is a powerful account.”
She said many of her company’s clients save in their ABLE accounts for decades and use them for living in retirement.
“If you qualify for this account, this could actually be your best, most powerful retirement vehicle out there,” Crist said.
The average ABLE account balance at Vestwell is roughly $13,000, and some accounts top $300,000, per Crist. Investment options run from an all-equity fund to an all-cash savings option. “The most popular option, however, that people choose is the cash option with a debit card,” Crist said.
A little background: These tax-advantaged accounts were created via the Achieving a Better Life Experience (ABLE) Act of 2014. The aim was to allow individuals with disabilities to save and invest without losing eligibility for benefits like Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Medicaid.
The investment growth is tax-free, and withdrawals for qualified expenses are not considered income for people receiving means-tested benefits such as Supplemental Security Income or Medicaid. Prior to this account, they could not have more than $2,000 in savings to receive benefits.
“The ABLE account is a band-aid for this serious harm that’s caused by the low SSI asset limit,” Darcy Milburn, an expert on disability finance at The Arc, an advocacy group for people with intellectual and developmental disabilities, told Yahoo Finance.
The majority of states and Washington, D.C., offer the accounts, but their adoption has been sluggish. Several reasons explain that, starting with the availability limited to people who became disabled before age 26.
Another issue is that not all states have programs, and those that do offer different features and limitations. And while you typically can open an account in a state where you don’t live, not every state permits nonresidents to do so.
Then there’s the lack of awareness about eligibility in general. “One big thing people struggle with is they don’t know whether or not they are eligible for an ABLE account, and they’re not sure how to figure that out,” Crist said.
“The word ‘disability’ confuses people,” she said. “People will have a diagnosis, but they might not think about it as a ‘disability.’ They would never say to themselves, ‘I am disabled.’ It’s just not the vernacular, not part of their identity.”
Under the new rules, you must have a disability or blindness that will last, or has lasted, at least a year and developed before the age of 46. You can qualify for an account if you’re on SSI or SSDI because of a condition listed on the Social Security Administration’s “List of Compassionate Allowances Conditions.”
If not, you can provide a signed diagnosis form by a licensed physician that indicates that your disability started when you were 46 or younger. A sample form can be downloaded at the National Resource Center website.
“Your disability can’t be mild, and it can’t be short-term,” Crist said. “It’s a very wide range — both physical and mental conditions that significantly affect someone’s day-to-day life, such as autism, ADHD, bipolar disorder, learning disorders, multiple sclerosis, traumatic brain injury, respiratory disorders, neurological disorders, and some kinds of cancer.”
There are no income limits to have an ABLE account. “You can be employed, unemployed, previously employed, no work history, and your savings amount in other accounts has no bearing,” said Jody Ellis, director of the ABLE National Resource Center.
Only one account is allowed per person, but anybody can contribute to your account. Parents, for example, can open one for their toddler who has a disability.
Rollovers of up to $20,000 a year are allowed from 529 plans. And recent IRS guidance states that rollovers from Trump Accounts will be permitted in the calendar year in which account owners turn 17.
To encourage contributions to these accounts, some states now offer an employer tax credit for employers that make contributions to an employee’s account.
The annual contribution limit for ABLE accounts in 2026 is $20,000. And account holders in most states who have jobs can contribute an additional $15,650 next year, provided they don’t participate in a workplace retirement plan. (In Alaska and Hawaii, there are higher extra contributions.)
States also set overall limits for account contributions — ranging from $235,000 to almost $600,000, Ellis said. The cap is effectively $100,000, though, for people receiving Supplemental Security Income.
The money can be used to pay for a range of qualified disability expenses, including basic living costs, mortgage payments, rent, utilities, health and medical expenses, technology like motorized wheelchairs, legal bills, public transportation, car repairs, education, employment training, personal support services, assistive technology, legal fees, and wellness programs.
When used for the allowable costs, there’s no penalty for emergency withdrawals and no age limit on withdrawals. If distributions are used for nonqualified expenses, the earnings portion of the distributions would count as taxable income and be subject to a 10% penalty.
In some states, funds remaining in an ABLE account after the owner dies may be subject to Medicaid “payback” rules — that allow states to claim remaining balances to pay for costs if the owner received, Mary Morris, chief executive officer at Commonwealth Savers, the organization that manages the national ABLEnow program, told Yahoo Finance.
Currently, roughly a half dozen states have laws exempting ABLE accounts from Medicaid recovery, and the upside far outweighs this concern, she said.
“After nearly a decade of working with individuals and families who rely on ABLE accounts, it is clear how meaningful this savings tool can be for financial wellness,” Morris added. “With eligibility now expanded, millions more Americans can access this flexible, tax-advantaged savings option. That’s a big deal.”
Second, there is no brick-and-mortar building where someone can go and open an account and speak with a representative face-to-face, Ellis said.
“Accounts are opened online, so you have to have internet access and an email address, which can be a barrier to people that have a disability,” she said. “Some state plans allow you to mail in a hard copy of an application. So there are workarounds, but it just may not be quite as easy.”
The other drawback is that some of the accounts have withdrawal rules. If you’re using an ABLE account for your monthly expenses, it may take five days for those funds to be available, so you need to plan ahead.
Start with the plan offered by your state. Not all states offer plans. Folks in Idaho, South Dakota, North Dakota, and Wisconsin, for instance, don’t have one. Many plans, however, are open to out-of-state residents. You can also transfer your account between state plans.
While there’s no federal tax deduction for contributions, some states offer tax breaks to residents.
The ABLE National Resource Center has direct links to all of the state plans that are available, along with comparison tools to help you get started.
“You don’t need to know everything about being able to get started,” Ellis said. “Some state plans don’t even require an initial deposit to open up an account. The average initial deposit required is $25.”
Chichester is not sure how much she will contribute to her ABLE account this year. Today, she works part-time from home for the Disability Independence Group, managing the group’s newsletter and social media accounts, and has slowly begun to use a walker instead of her wheelchair after years of physical therapy.
“I do know that this ABLE account will provide financial flexibility and security that I haven’t had since my injury over 10 years ago and support the independence I’ve been working so hard to achieve, now and going forward into my future as a person living with a disability.”
