Starting in January, millions of disabled Americans will become eligible to save and invest for current expenses and future needs without jeopardizing their federal benefits like Medicaid.
About six million more people, including about a million veterans, may 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 roughly a decade, but a federal law passed in 2022 expanded the program’s qualifying rules, which will take effect in 2026.
ABLE accounts, modeled loosely on 529 college saving accounts, are named for 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 Funds in the accounts can be saved and invested and withdrawn tax-free when spent for disability-related needs.
Even though 46 states and Washington, D.C., offer the accounts, their growth has been relatively slow — in part, because they were initially limited to people who became disabled before age 26.
Next year, the age for a qualifying disability rises to 46. That means people can be eligible if they become disabled later in life from, say, an accident, war wounds, the onset of mental illness or a disease like multiple sclerosis.
“This is a huge change for our community,” said Mark Raymond Jr., national outreach coordinator at 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 qualify for need-based federal benefits like Medicaid health coverage and Supplemental Security Income, or S.S.I., a disabled person generally can’t have more than $2,000 in savings or other assets. That makes it hard to save money for the future. In effect, Mr. Raymond said, disabled people “are boxed into poverty” by the rules because living with a disability is expensive.
But money in an ABLE account doesn’t affect eligibility for most public programs. People receiving S.S.I. can save up to $100,000 in an account without affecting their benefits, while no amount of ABLE funds affects eligibility for Medicaid and other public benefits.
Mr. Raymond, 37, said he planned to open one of the accounts in the new year. He became disabled at age 27, he said, when a diving accident damaged his spinal cord and left him unable to walk. At the time, he said, ABLE accounts were fairly new and he didn’t know about them. But even if he had been aware, 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?
At the end of September, there were just over 223,000 ABLE accounts with about $2.9 billion in assets, according to ISS Market Intelligence, a financial research firm. An estimated eight million people are eligible for the accounts. After the age of eligibility increases next year, about 14 million people may qualify.
“I think the message is starting to get out,” said Thomas Foley, executive director of the National Disability Institute, an advocacy group. But, he added, “we’ve got a long way to go.”
Darcy Milburn, an expert on disability finance at the Arc, an advocacy group for people with intellectual and developmental disabilities, said the accounts could be used as funds for a “rainy day.” But people must have money to save to benefit, she said. “To get the full advantage, you need to have money to put in, in the first place.”
Who can contribute to an ABLE account?
In addition to the account owner, family members, friends and employers can contribute on the disabled person’s behalf.
What can funds in an ABLE account be spent on?
The money can be used to pay for a range of expenses including basic living costs, housing, health and medical care, technology like motorized wheelchairs, legal bills, transportation and education.
How much can I contribute to an ABLE account?
The annual contribution limit for ABLE accounts in 2026 will increase to $20,000, 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 jobs can contribute an additional $15,650 next year, provided they don’t participate in a workplace retirement plan. (The extra contributions are higher in Alaska and Hawaii.) This feature, known as ABLE-to-Work, had been scheduled to expire at the end of this year, but this summer’s budget legislation made it permanent.
States also set overall limits in how much can be in the accounts — ranging from $235,000 to almost $600,000, said Jody Ellis, director of the ABLE National Resource Center. The cap is effectively $100,000, though, for people receiving Supplemental Security Income.
Are there potential downsides to an ABLE account?
In some states, funds left over in an ABLE account after the owner dies may be subject to Medicaid “payback” rules — meaning states may claim remaining balances to pay for costs if the owner received Medicaid benefits.
Virginia and at least a half dozen other states have passed laws exempting ABLE accounts from Medicaid recovery. Mary Morris, chief executive of Virginia’s Commonwealth Savers program, which administers the state’s ABLE account offering, said paybacks from the accounts so far didn’t seem to be widespread. “I haven’t heard it has been an issue,” 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 check 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. People who received S.S.I. and Social Security disability payments before the ABLE age eligibility cutoff automatically qualify for the accounts. If you don’t receive such benefits, you should make an appointment with a physician who can certify that you are eligible for an account, she said.
The center offers a sample form on its website to share with your doctor. You can obtain 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 Jan. 1.”
You should also check different ABLE plans, she said, to see what features you want. Start with the plan offered by your state. While there’s no federal tax deduction for contributions, some states offer tax breaks to residents. But many plans are open to out-of-state residents.
Consider features you want in an account. For instance, does the plan offer accounts with debit cards or mobile apps for easy access to the funds? And if you intend to invest your savings, are you comfortable with the plan’s menu of options?
Ryan Fitzgerald, a principal at Sellwood Investment Partners, an institutional advisory firm that consults with state ABLE plans, said most plans offered “slimmed down” investment menus compared with a typical 401(k) retirement plan or 529 college plan. They often include three or four funds that invest in stocks and bonds, ranging from conservative to more aggressive options aimed at longer-term growth.
Funds can be used to save for a specific need in the future, Mr. Fitzgerald said, such as a car, a vacation or a home. Many ABLE account users, however, keep cash in federally insured bank accounts to pay ongoing expenses, he said. When choosing a plan, he said, check the interest rate paid on the cash account because some pay significantly higher rates than others.
As more people start using the accounts, demand for a wider variety of investment options may grow, Mr. Fitzgerald said. “ABLE plans are really in their infancy.”
What else is changing about ABLE accounts?
Two other account features were also made permanent by this summer’s budget legislation. ABLE account owners who work and contribute to their own account may be eligible for a tax credit, known as the saver’s credit, of up to $1,000 for 2025 and up to $1,050 in 2026.
And funds from a 529 college savings plan may continue to be rolled over, tax-free, into an ABLE account, providing flexibility if the money is no longer needed for college.
Where can I learn more about ABLE accounts?
The ABLE National Resource Center offers details about the plans and how to use them. The Arc also offers information on its website.
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