599 | ABLE Accounts: Major Update | Brynne Conroy

0:00Jonathan Mendonsa:Hello and welcome to Chooseify. Today on the show, we have Brynne Conroy, who's here to talk about some significant changes to the ABLE accounts. And we actually spoke about these ABLE accounts way back in episode 108 with William McVeigh, where he talked about setting up a special needs trust. These are officially the 529A ABLE accounts and their savings and or investment options for people with disabilities who qualify for them. As Brynne said in this email to me, there are really significant positive changes coming to them. And we really wanted to get the word out. Just a quick background on Bryn.

0:34Jonathan Mendonsa:She handles American markets for Pocketsmith, which is actually a budgeting app that builds itself around your immediate and long-term financial goals. She has 15 years of experience in financial media and her extensive work in disability finance has earned her honors, such as the 2022 Plutus Award for best financial content for underserved communities. I think this is a really important episode. I think you're going to get a lot out of it. And with that, welcome to Choose FI. Before we get started, I keep this podcast entirely ad-free for two reasons. First, this is a FI podcast and I don't want to promote products that I don't want you to buy in the first place.

1:12Jonathan Mendonsa:And second, I really like the clean listening experience of a show where you don't have to fast forward ads. To keep it ad-free, all I ask of you as a listener is the next time you open a Travel Rewards credit card, go to choosefi.com slash cards. And with that, onto the show.

1:31Jonathan Mendonsa:Bryn, I am so happy to have you here. Thanks for doing this. I'm so glad to be here. Thank you for having me. Yeah, this should be great. I'm going to let you drive this because this is something that you have extensive, extensive knowledge in. I'm just going to ask questions and kind of rock and roll. So I guess let's start first off with what is an ABLE account? Yeah, so an ABLE account is a type of specialized 529 plan. It operates very differently from a traditional 529. And what it is, it's an account for disabled people. The most common case use for it is as an asset protection vehicle. When you are disabled, you might be enrolled in any number of programs that limit your savings.

2:17It's a type of forced poverty that some of these federal and state government programs put on you when you need to access certain government resources. So, for example, SSI is the big one. This is the one where if you've never really been able to work in adulthood for whatever reason, you might enroll in SSI benefits. There is an asset test on that. you are not allowed to have more than$2 ,000 in your name. Big problem.

2:45Jonathan Mendonsa:Yeah, that's crazy. Yeah. When you're disabled and you need to maybe go to the doctors more, have more unexpected expenses pop up. It's kind of wild. And so the ABLE account protects the first$100 ,000 that you have saved in it from that SSI asset test. So you're actually allowed to have an emergency fund. There's other programs too, though. You don't have to be on SSI to benefit from that asset test protection. You could be on Medicaid, and there's other state-run programming that sometimes has asset tests too, depending on where you live. Medicaid actually doesn't have a cap on how much is protected.

3:22Also, if you are saving up for a child in an ABLE account, you can use the money in there for college as one of the potential expenses. You can really use it for a whole lot. But on the FAFSA, an ABLE account is actually advantaged far more than a traditional 529, the assets held in that account will count against either yourself or your child, depending on whose account the name is in. It's 0%. So that's a really big deal too. And outside of asset test protection, it's also an investment vehicle. You can use it as a checking account if you want, but there's also investment options in there. And the tax advantages are pretty huge.

4:01On the federal side of things, you can make withdrawals at any point in your life for any qualified disability expense. Tax-free, penalty-free, that money is yours to use as you see fit. Within certain parameters, you're going to want to read your state disclosure document when you sign up for your plan, but really it's a wide net. You don't really get many front-end benefits on the federal tax side. In certain circumstances, you might be able to use the saver's credit or saver's match if you're contributing to your own account and your own name. But states actually provide a good deal of front-end tax benefits on top of those back-end benefits.

4:42So Pennsylvania and Mississippi offer a dollar-for-dollar state deduction for your contributions on your state income tax returns. Other states aren't quite as generous as those two, but there's still prorated deductions and credits that you might be able to claim. Okay.

4:59Jonathan Mendonsa:This is a federal program, a federal account, but there are additional state tax benefits in some states. Am I hearing you right? Yes. In this specific regard, it operates a lot like a traditional 529. So it's a federally legislated program, but it is administered by each individual state. You are absolutely allowed to purchase over state lines the vast majority of the time. Okay. Interesting. So yeah, it's funny because before we hit record, I had said, oh, this is a 529 because originally in that episode 108, William called it a 529 ABLE. And I might've misheard it. Actually, he might've said 529 ABLE.

5:37Jonathan Mendonsa:And I just somehow in my brain conflated the two or erased that second A. But yeah, you were careful to say it is under the same code section. So it's 529. but there are significant distinctions between this and a traditional 529 that we think of for regular college savings. But I guess there is some overlap. Yeah, absolutely. So I think on that administrative side, that's probably where you're going to see the most commonalities. The tax benefits are a little bit different. And all of the different things you can use the money on, that's probably the biggest difference, right? Because with a 529, you have to be using it for higher education or consider a rollover.

6:14There's only certain ways to access that money and still access the tax advantages. Whereas with an ABLE account, again, you're going to want to read your state plan disclosure when you sign up. But the vast majority of the time, you can use it for disability expenses. And when you are disabled, you cannot separate your disability from your personhood. So we're not just talking about like, oh, I have to spend this on therapy or medical expenses. You can spend it on food. You can spend it on vacation, you can spend it on housing is the really big thing. Because even a lot of like those supplemental needs, trust, special needs, trust, you actually aren't allowed to spend that money on housing.

6:56So having an ABLE account can even supplement some of these other financial tools that we see out there.

7:02Jonathan Mendonsa:Interesting. That is fascinating. So right. Unlike the traditional 529 college, like you said, you can't separate the disability from the person. So many of life expenses, including housing and other significant items can be used out of this account. I see the obviously the massive advantage for that. And of course, this is critically important. This is not like a normal five thing where it's just, oh, let's optimize. This is something that is truly critical. So let's be clear when we're talking at the margins about my brain always goes to optimizing, but I just want that to be clear and stated at the outset.

7:34Jonathan Mendonsa:Like, of course, I understand how critical this is. So that's like table stakes. Yeah. And it's interesting too, because I don't think optimizing is necessarily bad. I think, you know, there's going to be certain circumstances where people are using this for asset protection, where people are on SSI and it is going to be a lifeline for basic needs, but you can also guilt-free use it as an investment vehicle if you qualify. And there's plenty of disabled people out there who do work and who do engage in fire goals and who are able to kind of overcome some of those systemic barriers we see in our workplaces and still reap those tax advantages without necessarily being interested in the asset test protection.

8:20So, okay, that all makes sense.

8:22Jonathan Mendonsa:So I might be getting ahead of myself here, but who can contribute to these accounts? Are there limits? How does that all work generally? Yeah, so anybody. That's a really cool thing. Because if you are somebody who's disabled, and maybe you don't have access to the workplace, you can have family members contribute. And then those family members on the state tax benefit side, they get those credits or deductions for their contributions. So that's really exciting. There's no limit on who can contribute or how many people can contribute. There is an annual contribution level. And so that usually follows the gift tax exclusion amount every year.

9:01So this year in 2026, wow, it's$20 ,000. So that's the max amount across all contributors that can go into that account per year. There are some programs like Able to Work is a program that was set to sunset in 2025, but with the tax law that passed last year, it actually became permanent. And what that is, is if you work in a traditional job and you do not already have access to an employer-sponsored defined contribution plan, so like a 401k or anything like that, pensions are okay. But if you don't have access to those defined contribution plans, you can actually talk with your employer and set up an additional contribution to your ABLE account above that$20 ,000 limit that's equal to the federal poverty line in your state.

9:51And in some instances, that almost doubles the contribution amount.

9:56Jonathan Mendonsa:Wow, that's remarkable. Okay. So just to satisfy my own curiosity before we move forward, you said that the ABLE account protects the first$100 ,000 you have saved from that SSI, which I believe is supplemental security income. I want to ask about SSI more broadly because for people who aren't aware of that, I think that's important. But let's just say hypothetically, I think you said it was something crazy like$2 ,000 that would then strike you from being able to get SSI or maybe it would phase out or some such. So I definitely want you to dive into that. But let's just say hypothetically you had$110 ,000 in your ABLE account.

10:32Jonathan Mendonsa:What's the implication on SSI? Are you down to zero SSI at that point? Or how does that all work? Yeah. So there's a certain extent that you're allowed to earn money and it kind of counts in like this really prorated, but not very pro in that, like very punitive prorated way against your benefit. If you have$10 ,000 in savings above that$100 ,000 mark, that is going to start to count against you and it may disqualify you from the program. If that's the program you're relying on, you just want to be mindful of that$100 ,000 limit. But again, for all the other programming, like CMS for Medicaid and all of that, they've come out and said there is no limit to how much is protected within your ABLE account.

11:15There might be state limits on how much you're allowed to hold in the ABLE account total. But as far as CMS is concerned, they're not counting a dollar that's in there.

11:24Jonathan Mendonsa:Okay, gotcha. And you had said something earlier about the ABLE accounts that, quote, if you qualify. And I'm curious, who does qualify for these ABLE accounts? Before I get into this part, I just kind of want to note duality of two realities, right? So in the disability community, or rather outside of the disability community, sometimes we hear a lot about disabled people faking it to get benefits. And that's kind of a Darwinian meme that exists within our culture. And the reality is that really doesn't happen too often. Instead, what we see at a far larger scale is that disabled people are usually prevented from accessing programs for which they are eligible due to all of these administrative burdens.

12:09A really good example of that is the Disability Discharge Program for federal student loans. For a long time, the vast majority of people who qualified could not get past the paperwork burden. And then maybe 10, 15 years ago, I'm getting old now, sorry, judging the time is tricky, but they started automating the process. They were like, hey, we know you are on SSDI. We see that you are not working or we see you're accessing this healthcare program. And therefore we already know what your income is. So now we're just going to, as best we can as the federal government, go through our administrative roles and kind of notify you if you qualify.

12:49and we're going to lower some of those burdens. And over the past 10 to 15 years, we've kind of seen that process get easier with a lot of advocacy for an easier process. But that advocacy has paid off and it's gotten easier. Just bearing in mind that the trope of people faking to get onto disability programs isn't really true.

13:11Jonathan Mendonsa:Yeah, Bryn, I want to get on my soapbox here for a second also before you go on and actually answer the question. But yeah, this is one of those things that infuriates me so much. It's like messaging is everything. And I've never hit the messaging right where people actually understand this, but it's like arguing an anecdote. And I just find it that it's like small minded people often do this. I think in almost anything, there's going to be a tenth of a percent to one percent of people doing the wrong thing or just something that disproves something that is altogether otherwise obvious or works great.

13:45Jonathan Mendonsa:and so many small-minded people get stuck on that arguing and anecdote of, oh, but there's this one example of, and then they pull out the tropes of like somebody using food stamps to buy cigarettes or something. And it's like, as if that invalidates the whole program. And it's just such a preposterous and stupid line of reasoning that annoys me to no end. And it's like, you see that writ large in so many, it's not just with federal programs, of course, where we're specifically using this, But you see people arguing an anecdote all the time. And it's just such a terrible way to go through life.

14:20Jonathan Mendonsa:Like if something is 99.x % true, it's usually pretty true. It doesn't mean that the one thing invalidates it. The one bizarre little example you can find invalidates it. So soapbox over. I think that's important. That's something I've always wanted to say. So this is the perfect opportunity. Yeah, no. And so then on the flip side of it, we're here on a fire podcast, right? And I not always, right? And this is said without judgment, because I have a lot of respect for the FIRE community and the amazing feats that get pulled off. Sometimes when you're pursuing FIRE, you might be looking for some of those loopholes or gray areas more often.

14:57Like, I think a really good example of this is Medicaid after the ACA passed. When you're not pulling in an income, but you're living off your assets, depending on where you live and which state you live in, you might be able to access Medicaid even though you're okay. And I don't necessarily think, again, no value judgment on that for me. But I do want to just kind of acknowledge the dichotomy of the two audiences that intersect here as we talk about eligibility. I want to encourage everyone who qualifies for this account to open one. And if you're familiar with that disability trope I just spoke about, and that's in your lived experience, guess what?

15:32You're probably one of those people. But I also want to just make it very clear to people who maybe haven't had that experience in their life that I'm not sitting here promoting. Everybody go out and get one. Everybody qualifies. Of course.

15:45Jonathan Mendonsa:And yeah, and just to be clear, again, on the path to FI, there are some things that are gray areas. And I struggle with this because I think there's clear intention behind some programs, but yet there are rules for who qualify. Like you mentioned with Medicaid, for some people making very little income, even who have significant assets, they might qualify for that. Now, ACA subsidies are all up in the air, of course. This is a sore subject. But for the last number of years, there are a lot of people in the FI community who have significant assets but had very little income who got health insurance for free.

16:20Jonathan Mendonsa:There are also instances where some colleges offer free tuition for people making under X amount of dollars, and they sometimes don't look at the assets. Again, was that the intention of the program? No, it absolutely wasn't. But it's one of those instances where what are you going to do? Turn it down. Like if your kid applied to a college and you got, hey, I qualify for this. So I understand. I think some people do. There is a bit of a gray area ethically, but I think the rules are the rules ultimately. So that's kind of how I look at it, Bryn. But nothing is entirely straightforward. I think that's important to state also.

16:56Yeah, definitely. A hundred percent. And I do want to stress that like you don't have to be poverty level income to access this program ethically. The more people that engage that are qualified, the better. So even if you're like, well, I have a minor child who is disabled, but I'm doing pretty well in my career, don't feel guilty accessing the program. It is there for you too.

17:19Jonathan Mendonsa:You are entitled. Yeah, absolutely. So back to your question. Sorry, that was a very roundabout way to answer. But what you have to do to qualify is meet the Social Security Administration's definition of disabled. And that's something you can kind of look at on the site. Also look at as you're applying through your state program and judge yourself against it. I do want to stress that there is no requirement to be claiming disability benefits. Just because the SSA sets that definition doesn't mean that you have to be in a situation where you need to access those disability benefits. So the SSA definition, disabled, like, do you have to document this with a physician or some type of medical practitioner?

18:03Jonathan Mendonsa:Are there items like that? Does it have to be documented to that level? Yeah. So this program is run, administered state by state. So you're going to see slight variation between the states. Sometimes that may be required. It's not quite as intense as some of the other programs where, you know, you're going to need a doctor to write a biography about your day-to-day life. Nothing like that. Maybe a note will be required depending on your state. But a lot of times you can self-certify and open this account in as little as five minutes. Do you open them through the state? Is it similar to like a 529 college savings where I know Virginia 529 used to be the website?

18:44Jonathan Mendonsa:I think they might have changed it recently. That's where I live. Like, would you just Google 529A ABLE and then your state and then it would take you to an official website? Or is there a more general way to do this? That's a great way to do it. If you want kind of more direct and you're like afraid of bad Google link or something, you can go to a site called ABLE Today. And that's run by the National Association of State Treasurers. And they have a lot of information on all the different state plans. And they kind of link out from there. Okay. And that looks like abletoday.org. Yeah, exactly.

19:16Jonathan Mendonsa:Great. We will have that in the show notes. And it's funny because, yeah, you definitely hit on something that I think is so important. Please always be careful, especially when signing up for financial accounts of just going to a wrong site or some type of spam or phishing site. Never click on links and emails or do anything stupid. This is like a public service announcement that's totally not germane to what we're talking about here today. But, Bryn, since you brought it up, that's really important. So, yeah, it's.org. That's very important. Absolutely. So the big news this year is that previously to open an ABLE account, you had to be under the age of 26 when that disability onset.

19:52That discluded a large portion of the population. About 25 % of America's population lives with some type of disability. It was really great that it passed and it helped that subsection of people. The goal was always to expand that, to help more Americans. And in 2022, at the tail end of the year there, a bill called the Able Age Adjustment Act passed into law and changed all of that. And now effective January 1st, 2026. So if you are listening to this, it has already happened. This is open to you. The age of onset for that disability is now, it has to have first occurred before the age of 46.

20:34And this is massive. It doubles the amount of eligible people. One million veterans, I think now, are newly eligible with this. And when more people are eligible and access this account, it actually helps lower the administrative burden, which effectively lowers the fees for everybody who participates. So it's not only benefiting more Americans, but it's also lowering costs, which is really, really exciting.

21:00Jonathan Mendonsa:Oh, that is remarkable. So this went from previously it was below the age of 26 and now it's 46. This went into effect January 1st, 2026. So obviously you're hearing this after that. So this already is plausible and possible for you. A million veterans are now newly eligible. That's really something. You mentioned fees. Of course, we're a very fee-conscious community. How do the fees usually line up on these investments? It's probably not going to be as great as a Vanguard ETF, right? Very little is, including most 529 college savings plans. So I know with the 529 plans, it does differ pretty significantly state to state.