For most people living with disabilities, the cost of support and care is a huge financial burden.
Couple that with the potential loss of government-assisted funding for people with disabilities due to certain income criteria that make them ineligible to receive government-assisted support and life can be simply unbearable.
Prior to 2014, families receiving federal benefits were restricted in the amount of money they could save or invest.
A savings account of as little as $2000 could very easily get families taken off these benefits - in essence keeping them poor and preventing them from ever building any kind of wealth.
The 529 ABLE (Achieving a Better Life Experience) Act was passed in 2014 by the President to take away these thresholds so as to allow these families to continue to receive support while they climb out of poverty.
How Does The 529A ABLE Act Work?
Families with a member who has disabilities or the beneficiaries themselves can open up a tax-free 529 ABLE account and accumulate up to $17,000 per year while receiving government assistance (see the 529 plan contribution limits).
Additionally savings of up to $100,000 total can be accumulated and the beneficiary will not have to fear losing access to vital public benefits such as Supplemental Security Income (SSI).Opportunities to invest and earn returns on those investments are also available with a 529 ABLE account.
In both scenarios, the money in the 529 ABLE account is not taxed. Withdrawals from the account that are applied towards the care of the beneficiary are also tax-free.
It is important to note however, that while federal taxes may not be charged on qualifying expenses, some states will charge a state tax on the earnings in your 529 ABLE account.
Deposits into the 529 ABLE account can be made through contributions from friends and family to the account, an automated withdrawal from your regular bank account to the 529 ABLE account or by check.
Who Is Eligible To Open a 529 ABLE Account?
While each state’s requirements might differ slightly, in general in order open a 529 ABLE account , these criteria should be met:
- An individual with onset of disability before age 26 (starting in 2026, the age limit will increase to 46)
- You are eligible to receive benefits based on disabilities such as Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI)
- You have a disability certification including an official diagnosis signed by a physician
Which States Offer The 529 ABLE Program?
As of this writing, you can open 529 ABLE accounts in 42 states and the District of Columbia. You can visit your state’s website below to get more information.
Some of the states on this list do not require you to be a resident of that state to open an account.. Thus, if you live in a state that is not currently offering 529 ABLE accounts, you can seek out a state that has the no residency requirement.
List Of States That Offer The ABLE Program And Their Websites
Here are the states that currently offer 529ABLE programs:
Connecticut - No program
District of Columbia
Hawaii - No program
Idaho - No program
Maine - No program
North Dakota - No program
South Dakota - No program
Utah- No program
Wisconsin - No program
We have definitely come a long way as a country in continuing to support people with disabilities. The 529 ABLE Act is an excellent opportunity for people with disabilities to receive the help they need when they need it the most, while being given a chance to build a way out of the cycle of poverty.
We would love to hear your thoughts on the 529 ABLE plan in the comments.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
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