For those who receive Social Security and/or Medicaid benefits, the thought of being able to live above their means and save anything extra, let alone for the future, can seem, well, unrealistic. Many benefits that individuals require to meet their basic living and health care needs have resource limits. In the past, this truly has made saving nearly impossible. As you work to promote employment and help people toward being more empowered and self-sufficient, saving money and building assets is a necessary piece of their financial and personal success.
There is good news for those who need to remain under resource limits and maintain critical benefit eligibility. While working towards a more independent life, beneficiaries can use some methods of saving that can truly protect their benefits eligibility. One safe way to save and build assets is through establishing an ABLE, or Achieving a Better Life Experience, account.
The Achieving a Better Life Experience (ABLE) Act was passed by Congress in 2014 with the goal of allowing some individuals with disabilities and their families a way in which to save and pay for disability-related expenses. ABLE accounts allow for the individual, family, and anyone who would like to contribute to the account a means to save up to $15,000 a year. Income from this account will not be taxed.
Savings for disability-related expenses
Money saved in these accounts is intended to help individuals with a disability to be able to live fuller and more comfortable lives even while incurring disability-related expenses. These disability-related expenses can include an expansive list of items associated with living with a disability. This may include expenses that help improve health, independence, and/or quality of life, such as:
- food and housing
- employment training and support
- assistive technology and medical equipment
- personal support services
- health care expenses
- financial management and administrative services
Safe way to save for needs
One of the greatest advantages of these accounts is the protection it offers for many means-based benefits such as: Supplemental Security Income (SSI), Medicaid, and Supplemental Nutritional Assistance Program (SNAP) benefits. Medicaid and SSI allow for an individual to have up to $100,000 in an ABLE account, and they will exclude this from the set resource limits. If an individual exceeds the $100,000, they can have their benefits reinstated if they spend the excess income. An ABLE account is a way for those who receive means-based benefits to safely save for their needs.
Eligibility for an ABLE account requires that a person have a significant disability and the disability’s onset date was prior to turning 26-years-old. If an individual is receiving Social Security disability benefits (SSDI or SSI), they will already meet the definition of having a significant disability. For those that do not receive such benefits, they may still be eligible to open an ABLE account but will have to have a licensed physician provide documentation or certification of their disability.
In Indiana, the ABLE account program is INvestABLE, and the maximum savings limit is $450,000 (note that SSI recipients still have the $100,000 limit). An individual is only allowed to have one ABLE account.
Often individuals are required to ask permission to withdraw funds for items or services that they deem necessary. Because an ABLE account can work much like a debit account, ABLE account owners are provided more freedom of choice and thus more independence. For those who are working so hard to better themselves, it can feel self-defeating not to be able to easily access the money they earned. As you work with your consumer to be the driver on their road to financial success, an ABLE account might just make their journey a bit smoother.
One method of saving might not be enough
Please keep in mind that like many of us, one method of saving for the future is not always enough. Many individuals might need to also look to other means to save such as Special Needs Trusts, a Miller Trust, a Plan for Achieving Self-Support and/or an Individual Development Account. Depending on what benefits an individual receives and where the funds are coming from, it is not unusual for someone to set aside money in various ways. There is not a one-size-fits-all when it comes to safely saving for the future.
Remember that it is not your job to be a financial planner, but you can make a positive difference in the lives of those you serve just by introducing them to ABLE accounts. Many times, just knowing something exists can make all the difference. So, share your ABLE knowledge and help to promote safely saving towards a better tomorrow!
For more information on these wonderful savings accounts, you can access these links: