Tax-advantaged investment vehicles, known as ABLE accounts, cater to individuals with disabilities, offering a financial planning avenue.
In recent years, a unique financial tool has emerged for individuals with disabilities and their families - the ABLE (Achieving a Better Life Experience) account. Similar to 529 education plans, each state administers its own ABLE account program, offering a tax-advantaged savings and investment account.
One of the key benefits of ABLE accounts is the tax-free growth and withdrawals, so long as they're used for "qualified disability expenses." These expenses can range from education, housing, transportation, health care, assistive technology, and daily living needs, including food. Up to $100,000 in an ABLE account doesn't count against resource limits that determine public benefit eligibility.
The contribution limit for an ABLE account is set at $19,000 per year in 2025, with an initial minimum contribution requirement ranging from $25 to $50 in most states. The total lifetime contributions vary by state, with limits ranging from $235,000 to $600,000 or more.
In terms of investment options, ABLE accounts offer a range of risk-based asset allocation choices, from very conservative to very aggressive. This allows investors to pick options aligned with their risk tolerance and goals. For instance, IAble, a common ABLE program, offers seven risk-based options plus a checking account option.
The main differences in terms of risk and return come down to the asset allocation. The aggressive option, for example, may have about 90% stocks and 10% bonds, aiming for high long-term capital appreciation but with higher risk and volatility. On the other hand, the conservative option might have greater bond and cash exposure, aiming to preserve capital with lower volatility and lower expected returns.
Underlying investments in ABLE accounts typically include index funds and ETFs from major providers like Vanguard, Schwab, and BlackRock, offering broad market exposure. Many ABLE accounts also include a Checking Account Option or money market funds that are very low risk and highly liquid for immediate expenses.
It's important to note that most states charge an annual maintenance fee for ABLE accounts, ranging from $15 a year to $58. However, three states - Florida, Tennessee, and Massachusetts - don't charge account maintenance fees. You can find all fee details in each state plan disclosure document.
To qualify for an ABLE account, your disability must have started before you turned 26 years old. Anyone can make contributions to an ABLE account, including the account holder, friends, family, an employer, or a Special Needs Trust. The tax benefits of ABLE accounts mean that even more conservative options can be effective for preserving and growing funds without incurring taxes on gains.
In summary, ABLE accounts provide diverse investment options spanning from conservative (bond and cash-heavy) to aggressive (stock-heavy), enabling account holders to choose based on their comfort with investment risk and their financial goals. More aggressive options carry higher risk but offer greater growth potential, while more conservative options focus on capital preservation with lower returns but greater stability.
Investing in an ABLE account offers a chance for personal finance growth as these tax-advantaged savings and investment accounts provide a range of risk-based asset allocation choices, from conservative to aggressive, allowing investors to pick options aligned with their risk tolerance and goals. The contributions to an ABLE account, up to $19,000 per year in 2025, can be made by the account holder, family, friends, employers, or even a Special Needs Trust, making it a beneficial tool for individuals with disabilities and their families interested in personal-finance investing.
