ABLE Account Decision Guide Series

Selecting and Opening an ABLE Account

Step 1: Begin The Process Of Choosing An Able Account

Before making your priority list, think about how you plan to use the ABLE account. Will it be used as:

  1. A transactional account, that you will be using on an ongoing basis to make purchases that meet qualified disability expense (QDE) criteria (e.g., food, shelter costs, transportation expenses like gas, auto insurance, bus passes or Uber/Lyft rides). We recommend that you use funds in other non-ABLE accounts first before using the ABLE account to pay for purchases so that the ABLE account can grow tax-free above the resource limit; or
  2. A longer-term savings account, in which you will save for large purchases (e.g., a vehicle, down payment on a home), an emergency fund, other planned future expenses or even for retirement.

Factors that are important for you to consider when selecting an ABLE plan:

  • If you are an out-of-state resident, is the ABLE program a “national program” that allows people from other states to join?
  • Is there a minimum contribution required to open the account?
  • What investment options does the ABLE plan offer?
  • Does the plan offer a Federal Deposit Insured Corporation (FDIC) insured account?
  • Are there restrictions in the ABLE plan on how often or the amount of funds that can be withdrawn for qualified disability expenses?
  • Does the ABLE plan offer a “debit card/purchasing card” to pay for QDEs? Are there fees associated with use of the card?
  • Does the “debit card” offer limited access to funds and offer an additional card for someone to help support the ABLE account owner with larger qualified disability expenses purchases, if needed?
  • Does the ABLE plan offer a checking account option? Is there a fee for the ABLE plan checks?

There are more than 40 state ABLE plans open across the country. You may open only one ABLE account. To assist in making a decision on the plan that best meets the needs of the person with a disability, the Comparison Tools Video walks you through three tools that can help you narrow down choices and make the selection of a state plan. Use any or all three to help make your selection:

Compare State Programs

Search to Find Your Best Fit

Select a State Program from the Map Tool

You may open an ABLE account in your state, if your state offers an ABLE account or any ABLE plan that is open to non-residents. It is recommended that the eligible person, either alone or with their circle of support, use these tools and take time to research and compare state plans and features beginning with your home state’s plan (if your home state has an ABLE plan).

The reason ABLE NRC recommends reviewing your home state first is to determine if there are any state tax deductions or credits available to residents. If your home state does not offer ABLE plans, the comparison tools may be used to select another plan. Some ABLE plans have rules that you must live in the state to open the account.

Each state ABLE plan is required to have an ABLE Program Disclosure Document which can be found by using the State ABLE plan comparison tools. Click on the state ABLE plan’s name, which will take you to that specific ABLE program’s website. This is shown in the Comparison Tools Video. Disclosure Documents are typically located on each state ABLE plan’s website, usually at the bottom of the homepage.

The Disclosure Document provides a detailed description of the program and includes important information such as:

  1. Eligibility rules.
  2. Whether there is an initial minimum deposit or minimum amount needed for future deposits.
  3. State income tax credits or deductions.
  4. Annual and aggregate contribution limits.
  5. How an ABLE account may interact with Federal and state benefits (SSI and savings over $100,000).
  6. Account fees and whether they vary by state of residence.
  7. Investment options and fees.
  8. Whether the state ABLE program has a checking account or debit card option and any card fees.
  9. Information about how ABLE funds can be used to pay for qualified disability expenses (QDE) and the tax treatment of qualified disability expenses and non-qualified expenses.
  10. Withdrawal Hold Rules which are temporary delays before a deposit is available for withdrawal. This will vary depending upon the state plan as well as the source of the deposit (For example, an ABLE deposit from payroll deduction, a third party or from the ABLE account owner’s checking or savings account). There may also be a hold on withdrawals following an ABLE account owner’s change of address until the address is verified.
  11. Information about ABLE to ABLE or 529 College accounts to ABLE account rollovers.
  12. Information about the plan’s Medicaid Estate Recovery Provision for state residents who select their state’s ABLE plan.

In some ABLE plans, you must make a selection when you open the account. This can be updated or changed up to twice per year, which allows for flexibility and the opportunity to make changes as you learn strategies and your thinking evolves around how to make the best use of your ABLE account.

In some ABLE plans, if you do not choose an option, your contributions will be allocated to a “default investment option” which is a safe option. This may not offer much growth of the funds in your ABLE account, but it will also limit any potential losses.

Selections may include some or a mixture of the following:

  • A savings account option which may be insured under Federal Deposit Insured Corporation (FDIC);
  • A checking account option;
  • A debit card such as a “True Link Visa Card,” ABLE VISA Prepaid Card or other types of prepaid debit cards;
  • Various investment options which are similar to mutual funds and could include an income option, a growth option or a conservative, moderate and aggressive option. Most plans include 4-6 options, however, some include up to about 15;
  • A way for friends and family to make direct deposits into an ABLE account;
  • A way to sort out regular contributions from earned income from employment deposits.

The Disclosure Document shows different choices for savings and investing. There may be a separate document at the ABLE plan’s website that shows the current and past rates of return on investment (ROI) available through the ABLE plan.

Information varies by state and is outlined in each plan’s Disclosure Document. If you are unsure about investing, you could start by selecting the savings option so you have a safe place to save your money now. You can transfer funds among investment options twice per calendar year. You can choose where new contributions are saved and/or invested. These choices do not count towards the twice per calendar year rule.

The Financial Industry Regulatory Authority (FINRA) has great information on personal finance. You can learn more about savings and investing and risk and return on the FINRA website or by subscribing to updates. Financial services, games, tools, webinars and podcasts are also available 24/7 through our Financial Education resources.

Choosing the allocation of contributions depends on what the ABLE account owner wants to do with their ABLE account, their risk tolerance, as well as their short-term and long-term financial goals. All these should be taken into consideration, along with the information outlined in the Disclosure Document, when making a decision. Each person has a different experience with disability and unique factors that must be considered when making a decision!

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Note: Our ABLE Decision Guide Series is designed as an aid to decision making as it relates to establishing and using an ABLE account. This document does not cover every possible issue related to the topic and is not a substitute to more in-depth analysis that may be required in some cases.