Starting in January, millions of disabled Americans will have the right to save and invest for current expenses and future needs without jeopardizing their federal benefits such as Medicaid.
About six million more people, including about a million veterans, could qualify for the so-called ABLE accounts run by most states, according to an estimate by the National Disability Institute, a research and advocacy group. The accounts have been available for about a decade, but a federal law passed in 2022 expanded the program's qualification rules, which will take effect in 2026.
ABLE accounts, loosely based on 529 college savings accounts, are named after the Achieving a Better Life Experience Act, the 2014 law that created them. Funds in the accounts can be saved and invested and withdrawn tax-free when spent on disability-related needs.
Although 46 states and Washington, D.C., offer the accounts, their growth has been relatively slow — in part because they were originally limited to people who became disabled before age 26.
Next year the age for qualifying disability will rise to 46. This means people may be eligible if they become disabled later in life, for example due to an accident, war injuries, the onset of mental illness or a disease such as multiple sclerosis.
“This is a big change for our community,” said Mark Raymond Jr., national outreach coordinator for ABLE Today, an initiative of the National Association of State Treasurers that promotes awareness of the accounts.
What is the main benefit of an ABLE account?
To be eligible for need-based federal benefits such as Medicaid health insurance and Supplemental Security Income (SSI), a disabled person generally cannot have more than $2,000 in savings or other assets. This makes it difficult to save money for the future. In fact, Mr Raymond said, disabled people are being “driven into poverty” by the rules because living with a disability is expensive.
But money in an ABLE account does not affect eligibility for most public programs. Individuals receiving SSI can save up to $100,000 in an account without affecting their benefits, while the level of ABLE funding does not affect eligibility for Medicaid and other public benefits.
Mr Raymond, 37, said he plans to open one of the accounts in the new year. He said he became disabled at age 27 when a diving accident damaged his spinal cord and left him unable to walk. At the time, he said, ABLE accounts were still fairly new and he knew nothing about them. But even if he had known that, he said, he wouldn't have qualified because of his age. “I was just too old.”
People of any age can open an ABLE account as long as their disability began before the threshold date.
How many people have ABLE accounts?
According to ISS Market Intelligence, a financial research firm, there were just over 223,000 ABLE accounts with about $2.9 billion in assets at the end of September. An estimated eight million people are eligible for the accounts. If the eligibility age is raised next year, around 14 million people could become eligible.
“I think the message is slowly spreading,” said Thomas Foley, executive director of the National Disability Institute, an advocacy group. But he added: “We still have a long way to go.”
Darcy Milburn, disability finance expert at Arc, an advocacy group for people with intellectual and developmental disabilities, said the accounts could be used as money for a “rainy day.” But people need to have money to save to benefit, she said. “To reap the full benefits, you first have to invest money.”
Who can contribute to an ABLE account?
In addition to the account holder, family members, friends and employers can also donate on behalf of the disabled person.
What can the money in an ABLE account be spent on?
The money can be used to pay a range of expenses, including basic living expenses, housing costs, health and medical care, technology such as motorized wheelchairs, legal fees, transportation and education.
How much can I deposit into an ABLE account?
The annual contribution limit for ABLE accounts in 2026 will increase to $20,000, up from $19,000 this year, according to the ABLE National Resource Center, an arm of the National Disability Institute that provides information about the accounts.
And account holders in most states who have a job can contribute an additional $15,650 next year as long as they don't participate in a workplace retirement plan. (The additional contributions are higher in Alaska and Hawaii.) That feature, known as ABLE-to-Work, was set to expire at the end of this year but was made permanent by this summer's budget legislation.
States also set general caps on how much can remain in the accounts — ranging from $235,000 to nearly $600,000, said Jody Ellis, director of the ABLE National Resource Center. However, the cap is effectively $100,000 for people receiving Supplemental Security Income.
Are there potential downsides to an ABLE account?
In some states, the amounts remaining in an ABLE account after the owner's death may be subject to Medicaid “payback” rules. This means states can claim remaining balances to cover costs if the owner has received Medicaid benefits.
Virginia and at least a half-dozen other states have passed laws that exempt ABLE accounts from Medicaid reimbursement. Mary Morris, executive director of Virginia's Commonwealth Savers program, which manages the state's ABLE account offering, said repayments from the accounts don't appear to be widespread so far. “I didn’t hear that there was a problem,” she said.
Still, it's wise to check the rules in your state, according to the ABLE National Resource Center. You can ask a plan representative or review the plan's disclosure documents.
What can I do now to prepare for opening an account next year?
Ms. Ellis suggested preparing any documents you may need. Individuals who received SSI and Social Security disability benefits before the ABLE age limit are automatically eligible for the accounts. If you don't receive such benefits, you should make an appointment with a doctor who can confirm that you are eligible for an account, she said.
The center offers a sample form on its website that you can share with your doctor. You can get the certification now and use it to open the account in 2026. “It can be signed in 2025,” Ms. Ellis said. “You don’t have to wait until January 1st.”
You should also check out different ABLE plans to find out what features you want. Start with the plan offered by your state. While there is no federal tax deduction for contributions, some states offer tax breaks to their residents. However, many plans are also open to out-of-state residents.
Consider the features you want in an account. For example, does the plan offer debit card accounts or mobile apps for easy access to funds? And if you intend to invest your savings, are you satisfied with the plan's options?
Ryan Fitzgerald, principal at Sellwood Investment Partners, an institutional advisory firm that advises state ABLE plans, said most plans offered “slimmed down” investment menus compared to a typical 401(k) retirement plan or college 529 plan. These often include three or four funds that invest in stocks and bonds, ranging from conservative options to more aggressive options aimed at longer-term growth.
The funds can be used to save for a specific need in the future, such as a car, a vacation or a house, Fitzgerald said. However, many ABLE account users keep cash in government-insured bank accounts to pay for ongoing expenses, he said. When choosing a plan, check the interest rate paid on the cash account as some pay significantly higher interest rates than others.
As more people begin using the accounts, demand for a greater variety of investment options could increase, Fitzgerald said. “ABLE plans are still in their infancy.”
What else is changing about ABLE accounts?
Two additional account features were also made permanent through this summer's budget legislation. ABLE account holders who work and contribute to their own account may be eligible for a tax credit, called the savings credit, of up to $1,000 in 2025 and up to $1,050 in 2026.
And funds from a 529 college savings plan can still be rolled over tax-free into an ABLE account, providing flexibility when the money is no longer needed for college.
Where can I learn more about ABLE accounts?
The ABLE National Resource Center provides details on the plans and how to use them. The Arc also provides information on its website.