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  • Posted October 22, 2021

Maximizing The Financial And Emotional Benefits Of An ABLE Account

In our previous two articles, “The Financial Benefits of an ABLE Account” and “The Emotional Benefits of an ABLE Account: Empowerment, Independence, and Living with Anxiety and Shame,” we looked at the details of the ABLE account, and the very real and empowering emotional impact a holder of an ABLE account may experience.

Now, in our final article of the series, we look at what ABLE accounts are available and how they can be used effectively.

Because ABLE accounts often support ongoing spending far more directly than most other types of tax-preferenced accounts (that more often make fewer larger distributions, such as for college tuition or a year’s worth of retirement spending), it’s important to evaluate exactly how a prospective ABLE account actually facilitates payments. Fortunately, a growing number of ABLE accounts provide debit cards that allow beneficiaries to access and utilize their funds directly (which also helps to ensure the assets don’t get deposited into a bank account that itself could disqualify the beneficiary from government programs), while also providing some controls to ensure beneficiaries don’t accidentally ‘overspend’ their limited resources too quickly.

Ultimately, the key point is to recognize that ABLE accounts are about more than ‘just’ accumulating assets for a disabled beneficiary on a tax-preferenced basis, or preserving the beneficiary’s ability to utilize crucial government programs. Instead, ABLE accounts also provide a pathway to developing the self-confidence and financial autonomy of the beneficiary, as part of a supported decision-making approach, which over time can provide far greater emotional benefits than the mere financial benefits alone.

Part 3: Maximizing the Emotional and Financial Benefits of ABLE Accounts

For a disabled individual who has relied on government benefits and waivers but wants to start working and become more financially independent, it’s a high-stakes risky scenario.

The reason is that some waiver programs have waitlists, which can be months, years, decades, or even a century (given the sheer number of people in need and limited government resources). Imagine you’re an individual who thinks they can work, but know that if you go off your waivers to keep your income, you may end up back on a waitlist so long there’s no way you are ever going to get those services and support back. This phenomenon is known as benefit purgatory.

Fortunately, most states have what’s called “working disabled” programs, where the beneficiary might lose a few hundred dollars a month of SSI as they begin to work and earn their own income, but not all of it (making the transition easier). In addition, most states have programs that encourage people to work and receive Medicaid (and remain eligible for the associated waivers). And in some cases, disabled individuals aren’t even currently utilizing or relying on all the programs that are available (which means it’s not necessarily a program to be concerned about losing eligibility for).

Nonetheless, it’s very important to help disabled individuals get out of the benefit purgatory and grow their employment income and financial stability quickly to the point that if/when/as they render themselves ineligible for government benefits, they really do have enough to support themselves.

Enter the ABLE Account. Notably, the ABLE account’s design does not allow for unlimited saving. Once the account reaches $100,000, benefit programs are allowed to freeze (but not terminate) the recipient’s benefits until the account is spent down below $100,000 (another form of asset-based test, albeit with a higher threshold than the usual limits for SSI and Medicaid).

This freeze puts a unique opportunity in front of the beneficiary, in that they can test out what it feels like to not have access to the benefits they are receiving for a period of time, and test out the benefits purgatory transition. Someone can plan to do this exercise, or it can be required of them, but they should not need to reapply to programs to switch their benefits back on once the account has been reported to have been spent down below the asset limit.

This can be a powerful opportunity to plan and go through the emotional work of looking at life from a frame of more financial independence. Simply put, the financial support from the accumulated value of an ABLE account can allow someone to take greater risks with employment, to further build their own personal income, and their personal confidence.

In addition, ABLE accounts can build towards even more financial empowerment and even more substantive personal goals. For instance, owning a home is traditionally both a significant pathway to wealth, and an excluded asset in qualifying for government programs. However, it’s virtually impossible for a disabled individual to purchase a home, because they’re unable to accumulate a downpayment (due to asset tests), nor qualify for a mortgage. An ABLE account can be an amazing opportunity for an individual to save for purchases that are going to be an excluded asset, given that the savings themselves may not be an excluded asset yet. When an individual is able to save money for homeownership, it can really help be the catalyst to a life out of the benefit purgatory.


When a disabled individual begins to work and generate their own income, it’s important to coordinate the ABLE account with the potential to contribute to employer retirement plans. As disabled individuals are permitted to contribute the income they earn from employment to their own ABLE accounts… but only if they’re not also contributing to a retirement plan. Which means in practice, the working disabled must choose between ABLE account contributions or employer retirement plan contributions.

Fortunately, given that the working disabled often have limited income, both retirement account contributions and ABLE account contributions are eligible for the Saver’s Credit (up to 50% of the contribution amount for those with AGI of less than $39,500 in 2021, up to a maximum credit of $1,000).

The upside to choosing to contribute to the ABLE account is that while tax-free distributions of growth are limited to Qualified Disability Expenses, in practice, disabled individuals tend to have a wide range of expenses that qualify. Whereas a pre-tax retirement account may have limited value (as the tax deduction isn’t very valuable when income is low), and a Roth-style account may be tax-free after 5 years (since by virtue of their disability, the individual will otherwise be eligible for penalty-free withdrawals and tax-free earnings distributions)… but that’s still 5 years longer than the tax-free growth of an ABLE account.

Still, though, a working disabled individual would want to be certain they are not missing out on an employer match – an ‘instant’ return that’s hard to replicate anywhere – and the state they're living in may have an exemption for the working disabled on assets that are in a retirement plan (so the accumulation of assets in the retirement account won’t cause a disqualification of government benefits along the way). Notably, though, this is a very state-specific scenario. In addition, some states offer an additional state tax credit for contributions to an ABLE account (similar to the credit that some states provide for contributions to an ABLE account college savings plan).

It is important to note that one of the main misconceptions of the ABLE account is that the money saved each month is removed from the person’s countable income for the Social Security Administration. This is not the case. While the ABLE account’s assets may not be treated as countable assets, the income-based tests of SSI, SSDI, and Medicaid are all still fully in effect when income is contributed to an ABLE account (i.e., the ABLE does not shield or protect earnings income that is contributed from being counted for income tests).


Most tax-preferenced accounts, from retirement plans to ABLE account college savings plans, don’t experience withdrawals very often. In part, this is simply because the accounts are most commonly used for accumulation – not decumulation – and also because even when it is time to take dollars out, typically distributions happen in larger ‘chunks’ (e.g., an entire semester’s tuition, an entire month, quarter, or year’s worth of retirement spending, etc.).

By contrast, though, ABLE accounts often fuel day-to-day and weekly spending. As often the whole point of an ABLE account is that the disabled beneficiary cannot have more than $2,000 in assets in their own name to stay under the asset thresholds – even and especially including a liquid bank account. Which means most/all spending must occur directly from the account… and ABLE accounts are increasingly issuing debit cards that can be used by the disabled beneficiary to access the available dollars in the account.

Unfortunately though, in practice, the debit cards of ABLE accounts don’t always work in all places. A lot of times, the debit card feature is administered with a local or state bank that itself has limited reach, such that even though it might say Visa or MasterCard, the debit card may not be eligible to be used at lots of places that otherwise accept those cards, including small and local gas stations, grocery stores, department stores, and drugstores. Which means it’s very important to ensure that the debit card with the ABLE account will actually be usable at the stores that the beneficiary frequents.

In addition to debit card usability (at accepted stores), another important feature of ABLE account debit cards is how exactly they draw dollars from the account. For instance, some ABLE debit cards can draw in full from the account – which means a disabled beneficiary without ‘impulse control’ is at risk to overspend and fully spend down from their potentially limited assets. On the other hand, plans like Fidelity’s Attainable Savings ABLE, run by the state of Massachusetts, route dollars through a related but separate account with its own balance and limit… which means even if there is $5,000 in an ABLE account, the beneficiary might only be able to spend $1,000 of it immediately via the debit card… providing an additional layer of protection while still otherwise allowing the beneficiary at least some of their spending autonomy.

A similar approach to support beneficiary spending, from Ohio’s STABLE program (the first ABLE account offering in the country and one of the most innovative), loads what’s called the True Link card, which also provides a separate balance against which the debit card can draw… without opening up the entire account to the beneficiary at once, and done in a compliant way to ensure the balance is not counted unfavorably for income or asset purposes (as an outside bank account might be).

More generally, though, the point is simply that it’s not just about whether an ABLE account's debit card can be used everywhere, but also how easy it is to use and manage the withdrawals via the debit card.

From the financial advisor’s perspective, it’s also important to note that the Virginia 539 plan – ABLEAmerica – is administered by American Funds (which also manages the Virginia CollegeAmerica 529 plan), which makes it the only broker-sold ABLE account for financial advisors. Though notably, the Fidelity 529A plan in Massachusetts does offer their Registered Investment Advisers the opportunity to be on the ABLE account for their clients.

A common goal of people with disabilities is to live as much as possible like a person without a disability. This is also true when it comes to managing finances. That is what makes 529 ABLE accounts so empowering. The emotional benefit of an ABLE account is that the person with a disability gets to save, invest, and spend money, much like a person without a disability. Living normally. Saving like many adults. Investing like smart adults. Spending like every other adult. This is the emotional magic of an ABLE account.

For more information or to discuss the pros and cons of an ABLE account for your specific situation, contact Planning Across the Spectrum for Certified Neurodiverse Financial Planning Services.