A new financial tool for people with IDD.
Just a few years ago, families of a child with IDD faced some real challenges when it came to saving money for their child’s future.
The problem was that saving money beyond a certain point could put their child’s benefits at risk. Supplemental Security Income (SSI) or Social Security Disability Income (SSDI) help many families cover current expenses for their disabled children. Those benefits have financial limits however – if a family or person has too much in savings or income, the benefits may be stopped. This prevented many families from putting away money for their child’s needs, both today and down the road.
In the fall of 2016, the state of Oregon and the disability community worked together to create ABLE, a new kind of savings account. ABLE stands for Achieving a Better Life Experience, and the goal is to do exactly that: help people with disabilities and their families save money for the things that will improve their health, well-being, and independence. Money that is saved in an ABLE fund can be used for anything that improves the person’s quality of life.
Since the Oregon ABLE savings plan is so new, many transition students and their families are still learning about how it works. We spoke with Kaellen Hessel, Advocacy/Outreach Coordinator for the Oregon Savings Network, about what young adults with disabilities should know about starting and using an ABLE account.
“It’s never too late or too early to set up an ABLE account,” said Hessel. “These savings accounts can be especially important as kids graduate from high school or transition programs, so this is the time to get informed,” she added.
Here are a few key points to get you started on understanding how an ABLE account might help you plan for the future!
Four reasons transition students should consider an ABLE account:
1. ABLE helps build money management skills
Learning to use a credit or debit card while sticking to a budget is one of the biggest challenges that every teenager faces! ABLE accounts offer pre-paid cards that can be used anywhere that a credit card is accepted. But these cards help teach the skills needed to stick to a spending plan.
The ABLE card holds a pre-paid amount, so the user can’t dip into extra savings, or take cash out of an ATM. Yet like a credit card, each purchase can be checked online. This makes it easy for parents and teens to talk about where the money was spent, and whether the spending matched the budget goals.
Students or families can set up restrictions on the places the card is used. For example, a person might restrict how much they can spend on coffee, if they are trying to save for a long-term goal. Setting up these restrictions can be especially helpful when a young adult joins a group living situation. For example, if meals are the responsibility of the house, limiting that category on the ABLE card helps families know their child is not double-paying for groceries.
2. ABLE accounts have tax benefits
Once an account is set up, it’s an easy process for parents, grandparents or others to add money to the account. Each account has a page similar to a Kickstarter or Go Fund Me account, where anyone can contribute. This way, gifts from graduation or birthdays can make a real difference towards the student’s goals and quality of life. Contributing to an ABLE account has tax benefits for the donor, too – those details are changing this year, so check with your tax professional to learn more.
Up to $15,000 can be added into an ABLE account each year, without impacting the benefits like SSI and SSDI. Once a student begins working full time, ABLE allows them to use the account to begin saving toward retirement, too. The funds grow tax-free, much like a 529 savings account for college. And when the funds are used, they are not taxed as income.
3. ABLE sets students up for the future
Even if a family does not worry about protecting their child’s benefits, setting up an ABLE account can be important. A child fully supported by family may not need SSI or SSDI income, but once they turn 21 the benefits may become more important. Yet if the family has saved for them in a standard savings account, they may not qualify for benefits. ABLE accounts are not part of the equation for receiving benefits as an adult, and families can save without worry about their impact on future benefits.
4. ABLE accounts empower independent living
Through this savings tool, people with disabilities can set goals that might have seemed out of reach: bigger purchases, upgrading equipment for a better quality of life, or even taking a vacation! Their families can help them financially, and have a long-lasting impact on their future.
Until a child turns 18, an ABLE account is managed by the student’s parents, and the child is the beneficiary. At age 18, the account legally belongs to the beneficiary. This means the young adult can manage the funds themselves, or can choose who will manage it for them: their parents, a guardian, or another person with power of attorney. As Hessen explained, this change ensures that young adults are part of the decisions being made about their financial future. “Every 18-year-old has a lot of decisions to make, but this is an important one,” she explained. She added, “This account empowers people with disabilities to take charge of their lives.”
Learn more about ABLE accounts at OregonAbleSavings.com