By Ashlea Ebeling
A powerful tax-free investment option for people with disabilities is misunderstood and underused. That could change in the new year.
On Jan. 1, millions more Americans across income levels will be eligible to open what is called an ABLE account.
These accounts let low-income people with disabilities build up savings, without jeopardizing public benefits. But wealthy people with disabilities can use the accounts too, and save up to hundreds of thousands of dollars in them.
"People hear about it and think it's not for them. They're wrong," said Juliana Crist, head of ABLE programs at Vestwell, which administers accounts in 19 states. She said the average ABLE account balance at Vestwell is nearly $13,000, and the highest is $376,000.
Previously, individuals had to be diagnosed with a disability that began before they turned 26 to be eligible. A law that goes into effect in 2026 raises that to age 46. That means 14 million Americans will be eligible, up from eight million today, according to the National Disability Institute.
Who's eligible
One way individuals qualify for an account is if they are on Supplemental Security Income $(SSI)$, a government program that benefits certain low-income people, or Social Security Disability Insurance (SSDI).
People are also eligible if they can get a doctor's note that says they have a physical or mental impairment that results in severe functional limitations. That can include diagnoses as varied as autoimmune disorders or mental illnesses.
"There's a large population of people who have qualified conditions but the word 'disability' trips them up," said Crist. "The disability can't be mild, and it can't be short-term."
Despite steady growth in the number of ABLE accounts, just under 225,000 people have accounts today, with nearly $2.9 billion in them, according to ISS Market Intelligence.
Mark Raymond Jr., 37 years old, plans to open an account in the new year. He was left paralyzed after a diving accident in 2016, and was too old to open one at the time.
"I might just shove $35,000 in it," said Raymond Jr., chief executive and founder of Split Second Foundation, which operates a holistic wellness center in New Orleans.
How they work
The money grows tax-free and distributions at any age are tax-free when used for everyday expenses such as groceries, healthcare and even a down payment on a home or college tuition.
If distributions are used for nonqualified expenses, the earnings portion of the distributions would count as taxable income and be subject to a 10% penalty.
Investment lineups and fees vary, and most accounts come with a debit card. Parents or caretakers can set them up on behalf of minors or others, and act as a custodian.
How much you can contribute
The July tax law set the annual contribution limit at $20,000 for 2026, up from $19,000 this year. Account holders who work can put in an additional $15,650 (and more in Alaska and Hawaii). Total assets in an account can reach $100,000 without affecting SSI benefits. Once balances reach a certain amount -- more than $600,000 in New Hampshire and Arizona, for example -- you can no longer contribute.
Chris Curtin, a software architect at ADP, and his wife, Deborah, set up a 529 college savings account for their son Christopher who was diagnosed with autism. They later rolled the funds into an ABLE account in Georgia where they live. They contribute to it monthly, and it has grown to more than $50,000.
Now 19, Christopher is working 10 hours a week at a meat market and he contributes his pay to the account too.
"We're viewing this as an emergency fund. We don't know what comes next, " said Chris Curtin, who started a Webex space at work for parents of special needs children.
How to get an account
Natalie Pine, a financial planner and special needs consultant in College Station, Texas, advises clients to consider an ABLE account in their state (46 states and Washington, D.C. have programs). Some offer big tax breaks for contributions. Many are open to nonresidents.
ABLEtoday and SavingForCollege are good places to start a search.
One piece of the puzzle
Families ideally use ABLE accounts as part of a broader financial and estate plan that includes a special-needs trust, said James Lange, a CPA and lawyer in Pittsburgh, who co-wrote "Retire Secure for Parents of a Child With A Disability."
The father of Lange's wife died recently, and her share of his individual retirement account is going directly into a special-needs trust. The trust will benefit the Langes' 30-year-old daughter, Erica, who is autistic. She will be able to stretch out the required distributions from the IRA over her lifetime, saving hundreds of thousands of dollars in taxes.
With an ABLE account and the trust, Erica will have financial flexibility and stability over the long-term.
"Disability planning is overwhelming. People are exhausted before they ever get to the financial part," Lange said. "ABLE accounts are just one piece of the puzzle."
Write to Ashlea Ebeling at ashlea.ebeling@wsj.com
(END) Dow Jones Newswires
December 22, 2025 11:00 ET (16:00 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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