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How Disabled Individuals Can Save Without Penalizing Social Security Benefits

Smiling Lindsey PictureOur daughter has received Social Security Disability and Medicaid ever since she turned eighteen. The amount Lindsey receives has gone up over time, yet for a very long while, it was around $600 per month—not enough to live an independent life. And yet, that was her greatest wish (as well as ours, too)—she wanted to live in an apartment in downtown Silverton. Since she doesn’t drive, she wanted to be able to walk everywhere: to work, to Roth’s grocery store, and to her doctor and dentist appointments.

Lindsey works at a State Farm Insurance agent’s office in our small town. She files papers in a back room in their office.

“I work fulltime, two hours a day,” Lindsey tells anyone who asks. “I love my job. It is the best job in the world.”

But even with a part-time job and Social Security Disability benefits, Lindsey could barely pay rent and utilities. We applied for subsidized housing and she qualified. She also receives $16 on her Oregon Trail card (food stamps) each month.

When you make so little, it is hard to save, but Lindsey’s needs are simple.  She requires food, shelter, and medical attention (when needed). She lives on a budget and spends her allowance on Snicker’s Mocha Coffees and Dora The Explorer Coloring books.

Still, each month, Lindsey could save a little. Yet, for the disabled, the problem with building up savings is a conundrum. Because they receive government benefits, they are limited to no more than $2000 in total assets. If Lindsey saves too little, she may not have adequate funds if she experiences an emergency. If she saves too much, until she spends down her savings, she will lose her benefits.

This is also a problem for parents who want to save for their child. Any funds saved in a child’s name are considered assets and counted against the $2000 limit. The concern many parents have with this issue is not so much while we are alive. It is once we are no longer around to help our child complete the mounds of paperwork to apply for services and/or funding. And then other concerns pop up in the back of our minds: What if our child gets out of the program and cannot get back on because the government changes the rules? How will she live? What would happen to her then?

Well, as of the end of 2016, there is some good news for Oregonians. There is a new plan that helps disabled individuals save without penalty. It is called the Oregon ABLE (Achieving A Better Life Experience) Savings Plan.

Eligibility for the ABLE Savings program is based upon the Social Security Administration’s definition of disability: people with Down syndrome, autism, cerebral palsy, and other intellectual or developmental disabilities.

ABLESaving Money In Piggy Bank accounts allow people to set aside money for long-term savings. Anyone can contribute to an account up to the annual gift tax exclusion, currently $14,000. If your child is younger than twenty-one, Oregon residents are eligible for a tax deduction for their annual contribution. In 2016—this amount was up to $4,620 for a joint tax return and $2,310 for single filers.

If your child is older than twenty-one, the tax deduction no longer applies. Still, the ABLE account may be a great way for parents, grandparents, and the disabled individual to save for the future. The maximum ABLE account balance currently allowed is $310,000; however, once the account exceeds $100,000, it will begin to count against the $2,000 asset limit for SSI.

The ABLE program offers several investment options—depending on whether you need the money sooner or if you wish to plan for future expenditures. All earnings are tax-free if used for qualified expenses such as education, housing, assistive technology, personal support services and other disability-related expenses.

“Many have needed this for a long time, but it wasn’t in place,” said David Bell, outreach director for Oregon ABLE Savings Plan. “This is an important tool of empowerment.

Bell said that there are many expenses for someone living with disabilities that normal insurance doesn’t cover. The $2000 maximum assets aren’t just related to cash. For instance, if someone had to purchase an electric wheelchair—which is considered an asset—they would be left with significantly less allowable savings for other necessities.

Although the ABLE program is a savings program that is available to all states, not all have chosen to participate—possibly due to resources, possibly for other reasons. However, Oregon decided to be a leader. They wanted to set the bar in helping the disabled community. And since people who qualify are able to take part in ABLE investments outside their state of residence, it takes the pressure off those states that choose not to create programs at this point in time.

Natalie Pate, Statesman Journal reporter, wrote, “Individuals with disabilities will no longer have to live in poverty or limit their savings to receive state and federal benefits.”

For years, this has been a dance that Lindsey and I (as her representative payee—the person who is designated to oversee her finances) have struggled with. Keeping enough cash on hand in case she needs it for something. Spending down when she gets too much accumulated.

“The freedom to set financial goals and save your own money is so basic,” said Senator Sara Gelser (D-Corvallis), a sponsor of the legislation that created ABLE. “Unfortunately, for too long people with disabilities have been denied that basic opportunity.”

My husband and I are sighing with relief. ABLE is exactly the kind of program we’ve wished for. Now we can save for Lindsey’s future without financially harming her.*

*There may be other, better ways to save for your child than an Oregon ABLE account. Please read the fine print and discuss all options with a legal professional before deciding if this program is best for your particular situation.

Cover photo credit: 401kcalculator.org

Loving Lindsey Cover

My first book will be coming out September 26, 2017. If you are interested in learning more about Loving Lindsey: Raising a Daughter with Special Needs, please click here.

I share many passions in this world: antiquing, gardening, hiking, traveling, taking amateur photographs, writing, sitting on a white, sandy beach with my husband and sipping a frozen margarita—just to name a few. If you enjoy any of these things too, let's connect! The world is better with friends.

  • Lynn Keltner

    I wish Minnesota would organize something like this. So many of my clients would benefit.

    • It is my understanding that this is a federal program and each state can choose to participate. BUT, if your state is not participating, you can invest in another state’s program. You may find a state close to you that you feel comfortable investing with. Just a thought. But I sure hope ALL states participate. And I don’t know–maybe Minnesota is participating. It is worth it to check it out. Crossing my fingers for you.

  • This sounds like a really smart program – here’s hoping more will look into this and participate.

    • I agree. I do wonder how many states are participating. But please note, if your state doesn’t, you can participate in another state’s program.

  • Kristi Rieger Campbell

    Wow that’s awesome, Linda! Seriously. The strict limitations don’t make sense (I mean, I understand how they happen but seriously, what could people do to be sure their kids are okay forever??). I’m glad OR passed this and that Lindsey will be fine no matter what. Huge news.

    • It is huge news! But the even better news is that this is a federal program and any state that wishes to participate can. I urge everyone to check with their state to see if it is offered. If not, you can actually open an account in any state that participates.

      As far as the limitations, we’ve been struggling with this for years. I’m just so glad it is no longer something we have to worry about. We have more options and that is good for Lindsey and every person who has a disability. I hope the new government does not decide to take the program away. 🙁

  • Hillary Savoie

    This is a wonderful program! Thank you for sharing. These limitations are so frustrating. We’ve set up a special needs trust for our daughter with the help of my parents, but it is complicated and time-consuming. I’m glad people in Oregon have this option!! And, also, I’m completely enamored of your daughter’s description of her work!!!

    • Hillary–thanks so much for visiting. This program has been a dream come true and a huge mental relief for us. Fortunately, it is a federal program so all states can participate. Some states may choose not to and if they do that, then residents can select to participate in another state. I hope parents who have children with special needs will speak up. This can be a partial answer to so many future concerns for our children.

  • I don’t have a special needs child, but I have friends who do, and I know saving for their children’s future is always a concern. I hope more states develop similar programs!

    • Dana, this is a federal program. It may be available in the state you live in. I’d ask around. Caseworkers may know if it exists. If not, parents, the disabled, can invest in another state without a penalty to their Social Security benefits. It seems like a win-win to me. But I’m with you. I sure hope every state develops a program so it will be available easier to those who wish to save for their child or for themselves. Thanks so much for stopping by.