When you’re very low-income and cannot work, Supplemental Security Income (SSI) benefits can help some. And even if you’re getting the max monthly SSI payment, the program’s rules say you have to stay poor. Once the Social Security Administration (SSA) passed the ABLE Act in 2014, it gave younger SSI beneficiaries some wiggle room. Now, recipients have a way to grow their SSI benefits with an ABLE account without risking their monthly income.
What’s the ABLE Act?
The ABLE Act is short for “Achieving a Better Life Experience” Act, and it aims to help SSI recipients. This law established a special savings account rule to help the poorest disabled Americans save their SSI income. Prior to the ABLE Act, accumulating as little as $2,000 in savings meant losing your monthly SSI check. This gave millions of disabled Americans no incentive to save, since it would hurt them financially. What’s more parents with disabled kids struggled to put aside money for the future. But the ABLE Act, modeled after the 529 Savings plan, did away with that system. Now, disabled Americans have a way to save money and watch it grow without risking their SSI payments.
What’s an ABLE Account?
An ABLE account is essentially a tax-advantaged savings account that’s only available to people getting SSI. The account’s owner is also its beneficiary, but family members can also make deposits. You won’t pay taxes on any interest earned from money deposited in your account. And, you also won’t have to pay taxes on money you withdraw from these accounts. That’s true even if you use your ABLE money to pay for ineligible expenses under the program’s rules. You and your relatives can deposit up to $15,000 in this account every year without losing your SSI benefits. Unfortunately, you cannot deduct ABLE contributions on your federal taxes filed for that year. Still, some states do allow you to take state income tax deductions on ABLE account contributions.
Important: The agency making your SSI payments won’t count any money you save through this program against your $2,000 asset limit. It’s the only place your money can safely earn some interest without losing your monthly SSI benefits.
What Can I Pay for With the Money in My ABLE Account?
You can use the money in your ABLE account to cover many different disability-related expenses. These include education, housing, and transportation costs. Your ABLE savings can’t replace any private insurance, Medicaid, or SSI benefits. But if you’re getting help from one of these programs, you won’t face any penalties for having money in an ABLE account.
ABLE Program Benefits for Parents With Disabled Kids
If you’re a parent with a disabled child, ABLE programs offer some unique benefits for you, too. This program lets parents or other relatives help financially without putting your child’s SSI benefits at risk. Before the ABLE Act, parents had a hard time putting money aside for disabled children. A special-needs trust was the only option available, but it wasn’t a great choice. It costs a lot just to set up a special-needs trust, and it wasn’t easy to do. Parents would set up a special-needs trust to keep disabled children from inheriting anything in their name from family members. That way, disabled kids could still qualify for Medicaid and Social Security benefits after their legal guardians passed away.
Opening your child’s ABLE account is much simpler than creating a special-needs trust. It’s also more accessible for low-income families who have children with special needs.
What Parents With Special-Needs Children Should Know Before Opening an Account
There are a few differences between a special-needs trust and an ABLE account to keep in mind. First, there’s no limit to how much money you can put into a special-needs trust. But if you put over $100,000 into an ABLE account, the SSA will suspend your child’s SSI benefits. Once the account balance falls below that amount, the agency will reinstate your child’s SSI benefits. If an ABLE account’s owner dies, the state can claim money that’s left in it to recoup any Medicaid costs. A special-needs account is privately held and the money belongs to your child, even after passing away.
My State Doesn’t Have An ABLE Program, What Now?
It’s also important to note that some states still don’t have ABLE programs available for disabled residents. But if your state doesn’t have its own specific program yet, you can still open an ABLE account. Many states offer plans that anyone nationwide can sign up for, even if you don’t live there. Annual fees vary, depending on which state you open your account in. Various states have different investment programs you can use. Most, though, provide you with a reloadable, pre-paid debit card to use. And others offer tax deductions for state residents.
You can find your nearest ABLE account program in your state here. And remember, you don’t have to open an account that’s based in the same state where you live. Instead, choose the ABLE program that’s best suited for your individual needs.
Who Can Open an ABLE Account?
You automatically qualify to open an ABLE account if you:
- Are blind, OR
- Received your disability diagnosis before age 26 and now get monthly SSI payments
Unfortunately, if your disability happened after you turned 26, you aren’t eligible. If you do not receive SSI and/or SSDI, but still meet the age onset requirement, you may be eligible. However, you have to meet Social Security’s definition and criteria regarding functional limitations. You’ll also be required to send a letter of certification from a physician.
If you’re over 26, you may still qualify! You just need a doctor-confirmed disability diagnosis before your 26th birthday.
Finding the Right ABLE Account For Your Financial Needs
In January 2018, disabled individuals on SSI income had access to 30 different ABLE account programs nationwide. Many of them enroll individuals regardless of your state of residence. (Though there are some exceptions.)
Here are some things to consider while choosing a program to open your ABLE account:
- Is there a minimum contribution required to open an ABLE account with this particular program?
- Are there any restrictions on how often you can withdraw funds from your ABLE account?
- What are the investment options your state’s ABLE program can offer you after opening your account?
- Are there any unique or value-added program elements designed to help you save more, grow your money, or manage your invested dollars?
- Does your state offer any unique program benefits for opening a new account? (Some have a fund-matching program or incentives/rewards, financial literacy classes for account holders, etc.)
- Does your state have a program? If so, do they offer a state income tax deduction for making contributions?
- Is there a debit card available for people who enroll in this program? If so, are there added costs or fees you’ll pay to use this card?
You May Qualify for Legal Assistance
Many different programs can help disabled people make ends meet, but knowing where to start can feel overwhelming. Luckily, you don’t have to go through this alone. A Social Security lawyer or disability advocate can help guide you through the claims process or appeal a denial, if needed. Our advocates work on contingency, so you’ll pay nothing for application help or legal advice. Best of all, you can get confidential answers that apply to your specific situation in person, free of charge. In fact, having an attorney file your paperwork nearly triples your chances for benefit approval.
Ready to see if you may qualify? Click the button below to start your free disability benefits evaluation now.
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Mandy Voisin is a freelance writer, blogger, and author of Girls of the Ocean and Star of Deliverance. As an accomplished content marketing consultant, mom of four and doctor's wife, Mandy has written hundreds of articles about dangerous drugs and medical devices, medical issues that impact disabled Americans, veterans' healthcare and workers' compensation issues since 2016.