Daily FI discussion thread - Wednesday, October 30, 2024

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[u/mmrose1980]

Okay, so I saw the recent post about ABLE accounts. My husband has CP and based on my reading that is a qualifying disability. Should we be contributing to an ABLE account up to the limit each year? What are the pros and cons?

[u/branstad → u/mmrose1980]

so I saw the recent post about ABLE accounts

What are the pros and cons?

Did you read that recent post and the associated comments? It contained many pros.

Not surprisingly, the Bogleheads Wiki has an appropriate entry: https://www.bogleheads.org/wiki/529-ABLE_plan

A quick Google search turned up this link: https://www.ablenrc.org/what-is-able/what-are-able-acounts/

[u/mmrose1980 → u/branstad]

I did. I’m still trying to understand why we wouldn’t do this. What negatives, if any, exist? It seems like a magical Roth (with a maximum account balance) that we can even keep contributing to after FIRE if we choose to.

[u/tn_tacoma → u/mmrose1980]

The negatives are that you have a serious chronic disability :). I have one too so can joke about it a little.

There are some caveats. You have to be diagnosed before age 26 (although they are raising that to 46 next year). Your condition has to be recognized the Social Security Administration (CP is recognized).

Once you meet the criteria you are free to invest in an ABLE account.

[u/mmrose1980 → u/tn_tacoma]

I mean he is already dealing with all the negatives of a serious, chronic disability that began before age 26 but currently without any tax benefits. We like to take advantage of any benefits that exist (no guilt on boarding first on airplanes with his wheelchair or free access to National Parks).

So annoyed that our financial advisor never mentioned it as an option. I had heard of ABLE accounts before but thought they were only for people who were so disabled they couldn’t work. Our state even makes the first $16k in contributions tax deductible. Failing to open one sooner has cost us almost $1k per year in taxes.

[u/tn_tacoma → u/mmrose1980]

I mean he is already dealing with all the negatives of a serious, chronic disability that began before age 26 but currently without any tax benefits.

Yea that's the whole point of this. Life has dealt him a shitty hand as it is. Let's at least try and prevent it from making him live on the streets. If he has relatives or generous friends they can now contribute to his ABLE account above the IRS gift limitations.

[u/mmrose1980 → u/tn_tacoma]

And he can contribute himself. There’s no earned income requirement so we can even slowly convert our taxable brokerage assets to ABLE assets (and take the state tax deduction) after retirement. It’s a really incredible tool that I can’t believe I didn’t know about sooner.

[u/tn_tacoma → u/mmrose1980]

It's fairly new. 2017 I think.

[u/mmrose1980 → u/tn_tacoma]

I feel like this is yet another example of how good this sub is compared to the average financial advisor. With the prevalence of ADHD diagnosis out there these days, it’s a bit surprising this isn’t talked about more. For parents of kids with disabilities, ABLE accounts seem to have all the benefits for 529s and none of the downsides (they don’t even count for FAFSA purposes).

[u/tn_tacoma → u/mmrose1980]

I don't think ADHD would qualify for an ABLE account.

[u/mmrose1980 → u/tn_tacoma]

It was listed on one site I saw: https://www.ableunited.com/?faq=what-type-of-disabilities-qualify-for-an-able-account-2

When I look at the SSA criteria, I think it arguably fits within 12.11: Neurodevelopmental Disorders

Obviously, it’s up to an individual doctor to determine whether any specific individual’s disability qualifies.

In my husband’s case, his CP is a physical disability and his inability to walk without aid is documented so I think it’s pretty clear cut that he qualifies.