Tuesday, October 17, 2017

Thinking about ABLE

In my September 18 post (“News, News, News”), I wrote about the briefings on ABLE (Achieving a Better Life Experience) accounts at the June 29 and September 15 Supporting Families (SF CoP) sessions (https://tinyurl.com/yczvmduh).  It was clear at that last meeting that some folks were skeptical, and I’m sure that DDS is now hard at work to arrange a financial workshop soon, maybe with Capital Area Asset Builders (http://www.caab.org/en), to help answer some of people’s more fundamental questions about finance and investing.  But since I was the one who pushed DDS to arrange these briefings, I owe it to you to try to give a little more of my own thinking about why folks needed to know about this opportunity.

As most of you know, I’m the parent of a young man with a developmental disability.  I first “tuned in” to the issue of ABLE accounts at the national Arc’s Disability Policy Seminar back in the spring of 2016 (https://blog.thearc.org/2016/04/20/financial-capability-creates-independence), and I realized at that point what a powerful tool ABLE accounts can be for people with disabilities who want to save for a life goal.  A lot depends on personal circumstances though, and in my opinion, these are some of the most important things to know when it comes to ABLE:

·         Anyone with a documented disability can qualify for an ABLE account (http://www.ablenrc.org/about/what-are-able-accounts), but ABLE is especially important for folks like my son who are receiving Supplemental Security Income (SSI) or Medicaid supports.  Without an ABLE account, if you want to save for a car to get to work, to pay for a class you want to take, or to buy some specialized equipment, you risk going over your $2000 asset limit and losing your SSI payments and your eligibility for Medicaid services. But if you save for these types of expenses in an ABLE account the money won’t count against that asset limit.  This is big, if you have a source of money and you’d like to save for important purchases to make your life better.

·         So, do you have any money you could save?  Maybe you’re lucky enough to be earning a little, but you have to make sure every month that your income doesn’t push your bank account above $2000.  Or maybe – just maybe – there’s a parent, or a relative or friend, who would like to help you out, but can’t give you money because they don’t want you to lose your Medicaid supports.  With an ABLE account, that income – earnings or gifts – won’t put your safety net at risk while you plan for your future.

·         What happens to the money in an ABLE account?  It’s invested – in stocks, bonds, and maybe a little cash – so it can earn interest for you.  Every ABLE account (more on the choices below) has different investment options – some options carry a little higher risk and so the interest you earn will be higher to reflect that, and some options are less risky so you’ll earn lower interest with those.  At the September SF CoP session, some people were worried that folks just wanted to gamble with their limited resources.  It’s true that there’s a risk with any investment except a traditional bank account – but there’s also the very strong likelihood of much higher returns.

·         Since the law was passed in 2015 allowing states to make ABLE accounts available, over 20 states have done that (http://www.ablenrc.org/state-review#overlay-context=home, or http://www.thearc.org/what-we-do/public-policy/issues/able-program-implementation).  D.C.’s ABLE account is one of the most recent (https://savewithable.com/dc/home.html).  Many states allow non-residents to open accounts, so D.C. ABLE isn’t your only choice.  The investment options, fee structure (see below!) and other details are all a little different, so it’s hard to generalize about what’s best for a particular individual to do.  Eventually people will be able to look at different states’ record of money management and earnings, but it’s too soon to know that yet because they’re so new.  What you do need to know is that you can always move your money to another state’s ABLE account if you don’t like how things are going.

·         But there is something you do need to think about before you start putting money into an ABLE account.  Most accounts have a low minimum deposit to open an account – in D.C. that amount is $25.00 - but every account has management fees and when those are fixed fees they can quickly “erase” small amounts of money.  D.C. ABLE, for example, carries an annual fixed fee of $45 -55, plus a percentage based on the amount in the account.  A few states’ ABLE accounts – Tennessee’s is one that I know (http://abletn.gov) only carry a percentage fee, so those might be more attractive for people who can only invest a small amount to start with.

There’s more to know, but these are the basics.  I would just leave you with this: 

1)      Don’t distrust ABLE accounts right off the bat, they aren’t a scam. 
2)      ABLE benefits people who have sources of money available to save for important expenses but have concerns about pushing their savings above the $2000 asset limit.  If that’s not you, then don’t think any more about ABLE right now.
3)      Finally, If you have less than $100 to start an account, it still may be worthwhile for you, but I’d suggest you look only at the ABLE accounts that don’t carry a fixed fee.  You may pay a slightly higher percentage, but you’ll still be earning interest on your money.

Finally, please remember that although I’ve tried to be fully accurate, I’m not the ABLE expert.  So check the official websites – I’ve tried to provide the best links above – and think it through.  Hopefully DDS will host a financial workshop soon and you can get more of your questions answered then.