ABLE Accounts: Tax-advantaged Savings Accounts for Individuals with Disabilities

When we think about what living richly means to us, it often conjures images of saving for retirement, financing the kids’ college education or purchasing a home. These dreams for the future are shared among many families, but for others, this idea takes a very different form.
Luke Knauss cropped

For families who have children with disabilities, such as my own, living richly means being able to provide the best quality of life possible and to allow them to live a life with dignity. My 12-year-old son, Luke, was born with damage to his brain, and it’s always been a purpose close to my heart to make sure he has support and resources now, as well as later in life when I’m no longer around or able to fully support his needs.

In 2014, the United States Congress passed the Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act, which enables families to create tax-free savings accounts for their children with special needs. These accounts are specifically designed to ease the financial strain on individuals with disabilities without affecting their ability to access social services through Medicaid.

Each year, up to $15,000 can be deposited into an ABLE account for a disabled person. Though there is no tax deduction on the contribution, the funds can be invested to grow tax-free and be withdrawn tax-free if used to pay for qualified disability-related expenses, including education, housing, transportation, and any supplies that assist with day-to-day tasks or other living expenses.

The account is set up similarly to a Section 529 college savings plan. It is owned by the parent or guardian, and the beneficiary of the account is an individual who has been diagnosed with a disability before age 26. The key benefit of an ABLE account, besides offering tax-free growth and withdrawal of funds, is that ABLE funds do not count as IRS-reported income, and therefore do not impact an individual’s eligibility for public benefits programs, such as health care, food stamps, housing assistance and social security benefits.

Investment and withdrawal guidelines for ABLE programs vary from state to state. Here in Washington, the state has established a savings program called the “Washington State ABLE Savings Plan.” For as little as a $25 initial deposit, parents or guardians can set up an account for a disabled individual. The savings program allows the owner to allocate funds using a simple cash savings option and/or invest in three different asset allocation strategies:

  • ABLE Conservative (20% stocks, 80% bonds)
  • ABLE Moderate (50% stocks, 50% bonds)
  • ABLE Aggressive (84% stocks, 16% bonds)

Once the account is set up, the account owner can easily make deposits and withdrawals using the online platform, and also has the option to allow for others to gift contributions to the ABLE account. One thing to be aware of is that there is a $35 annual maintenance fee, which could quickly erode an account with a smaller balance.

A number of CWM clients have children or grandchildren experiencing a disability. For example, one of my clients is a grandmother who opened 529 savings accounts to fund her grandchildren’s education. One grandchild, however, has special needs and she would like to be able to use those funds to pursue other goals. Instead of funding a Section 529 college savings account, the grandmother can establish an ABLE account so her grandchild can live a more comfortable life without impacting her ability to access necessary social programs.

Through my own experience and working with the incredible families we serve at CWM, I know that although special needs differ, one thing we all have in common is that we love our kids with all our hearts and want to provide the best for them.

Interested in learning more about ABLE accounts and determining if your family member is eligible? You can visit

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This article has been prepared and distributed for informational purposes only and is not a solicitation or an offer to buy any security or investment or to participate in any trading strategy. The opinions voiced in this material are for general informational purposes only and are not intended to provide or be a substitute for specific professional financial, tax or legal advice or recommendations for any individuals. Individual circumstances vary. Information is based on sources believed to be reliable. Please consult a financial professional prior to investing.

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