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If you receive Social Security Disability Insurance (SSDI) benefits, you could lose them if you have more than $2,000 in a savings account for emergencies. But with rising living costs, you may need up to $35,000 to cover six months of living expenses.
For the estimated 7.3 million Americans who receive SSDI benefits (as of April 2024), this limit on savings presents a serious challenge amid rising housing, healthcare, and transportation costs.
An October 2023 report from the Federal Reserve reports that the average American has about $8,000 in savings, well above what people on disability can legally keep without risking benefits.
Fortunately, there is another option. Those with disabilities can use an ABLE account to put more money aside in case of unexpected costs. Here’s how ABLE accounts work and why they might be a better place to save.
Key Takeaways
- People receiving disability benefits are typically limited to $2,000 in assets, making it difficult to build an emergency fund in a regular savings account.
- ABLE (Achieving a Better Life Experience) accounts allow individuals with disabilities to save more without losing eligibility for benefits.
- Funds in ABLE accounts grow tax-free and can be withdrawn tax-free for qualified disability expenses, including housing, food, and healthcare.
- ABLE accounts are managed by individual states, and rules on contribution limits, withdrawals, and eligible expenses may vary.
Tax-Free Withdrawals and Growth
Funds in an ABLE account (also known as a 529A account) are invested and grow tax-free, and allow you to make tax-free withdrawals for qualified disability expenses (QDEs).
While ABLE accounts have annual contribution limits (currently $19,000 in 2025), they allow those with disabilities to save more than the $2,000 allowed in a regular savings account without the risk of losing disability benefits.
It’s important to note that ABLE accounts are managed by each state, and there are state-specific limits on the total balance in an ABLE account, usually up to $300,000, with only the first $100,000 exempt from impacting eligibility.
ABLE accounts don’t limit the number of withdrawals, making them ideal for emergency savings since funds remain accessible. However, there may be daily or monthly limits on the amount you can withdraw that vary by state, so it’s important to check your state’s policy.
Broader Spending Options
Unlike other accounts for individuals with a disability, ABLE accounts allow you to use the money on a broader range of expenses, including basic living costs like food, housing, transportation, and support services. This makes ABLE accounts a good option for those with disabilities to maximize their emergency savings.
ABLE accounts are inexpensive and easy to set up and can be done directly through the state’s website.
The Bottom Line
An ABLE account is a good option for those with disabilities to save more emergency funds without the risk of losing benefits. While there are some limitations and state-specific rules, an ABLE account allows holders to save more money, withdraw funds easily, and use it on a broader range of expenses.
