Whether you are transitioning from active duty or have been out of uniform for years, navigating civilian life requires financial readiness. A tax-free Achieving a Better Life Experience (ABLE) account supports Veterans and their family members with disabilities to build financial defenses, covering every phase of civilian mission.
Veterans with disabilities may receive benefits from the Department of Veterans Affairs (VA), the Department of Defense (DoD) military retirement program or the Social Security Administration (SSA). Some Veterans with disabilities may not receive any of these benefits but may still be eligible for an ABLE account to save and invest tax-free. Disability status to qualify for an ABLE account is determined using a different criterion than the VA or DoD. It is also different from the SSA adult definition of disability which considers work activity. You and family members who have a disability may be eligible to open an ABLE account regardless of benefit status, disability rating or whether you are working.
This brief covers VA benefits, which are the most common payments for Veterans with disabilities, and how they work with an ABLE account. It highlights how Veterans with disabilities can achieve financial stability through an ABLE account. Many of the concepts included in this brief apply to all Veterans.
Overview
An ABLE account lets eligible people with disabilities save and invest money without losing access to key benefits. For Veterans, this means they can save and invest tax-free, while keeping their VA benefits. Currently, one million Veterans are eligible to open an ABLE account. A person who has a disability that began before age 26 is ABLE eligible if they meet medical criteria. On January 1, 2026, the age of disability onset expands to include those who have a disability that began before age 46. This expansion is expected to more than double the number of Veterans who are eligible to open an account at any age.
To qualify, a Veteran’s disability must meet the Social Security Administration (SSA) medical criteria for 100% total and permanent disability. This is different from the VA’s “Schedule for Rating Disabilities” or “individual unemployability” designations. Even Veterans with a lower percentage disability rating from the VA may still qualify for an ABLE account because SSA criteria looks at both service connected and non-service-connected disabilities, individually and in combination.
If the Veteran or family member does not receive SSA disability benefits, but meets the age of onset, a doctor must provide written verification that the person has a disability of required severity that began before the age of 26. A person can ask their doctor to sign a Disability Certification. The Veteran and/or family member keeps the disability certification in their records which allows them to self-certify that they are ABLE-eligible when they apply to open the account.
Understanding VA Benefits: Income and Net Worth
VA benefits can include monetary benefits, vocational rehabilitation services, educational assistance, home loan benefits and other supports and services. The VA may also provide extra payments, like “aid and attendance” for Veterans who are housebound or need help with daily activities, or they may receive “special monthly compensation” if they have a service-connected traumatic brain injury. The most common VA benefits are:
- Service-Connected VA Benefits: Often called “compensation,” these benefits are awarded to Veterans whose disabilities are related to their military service. These benefits are not affected by a Veteran’s income or resources, so Veterans can receive contributions from others and save money without losing eligibility.
- VA Pension (Means-Tested, Non-Service-Connected): This benefit, usually called “VA Pension,” is paid to Veterans with a permanent and total disability which does not have to be related to their military service. It is means-tested, meaning a Veteran’s income and net worth (resources or assets) affects their eligibility and the amount they receive. An ABLE account can hold savings and offer tax-free investment growth without disqualifying them from this pension.
The Veterans Benefits Administration (VBA) oversees all federal benefit programs available to Veterans and their family.
Advantages of ABLE Accounts for Veterans
Veterans with disabilities face unique financial challenges when trying to save for the future while protecting their eligibility for critical benefits. Below are several key advantages of ABLE accounts that support Veterans in managing their finances effectively:
- Tax-Free Savings and Investment Growth
Contributions to an ABLE account are made with post tax dollars. The savings and investment growth is not subject to federal taxes. This allows Veterans to build savings over time without adding to income or tax burdens.
- Benefit Protection/Service-Connected VA Benefits
Funds in an ABLE account do not count against a Veteran’s eligibility for service-connected VA benefits. This means that Veterans can receive direct deposit contributions from others, save and invest money in their ABLE account and use it without worrying about losing these benefits.
- Preservation of VA Pension Benefits
Family members or friends can contribute to a veteran’s ABLE account without affecting the Veteran’s VA Pension benefits. This allows Veterans to receive additional financial support without risking the loss of benefits. The money saved in the ABLE account is not counted as an asset or part of net worth.
- Protection of Non-VA Means-Tested Benefits
The funds in the ABLE account supplement but do not replace benefits under other programs.
The account balance is not counted as a resource, asset or in net worth, nor is it counted when determining eligibility for federally funded, means-tested benefit programs. By using an ABLE account, Veterans can safeguard benefits important to them while accumulating financial resources.
- Tax-Free Distributions for Qualified Disability Expenses
Distributions from the ABLE account may be made at any time, without penalty or tax, for qualified disability expenses (QDEs). QDEs fall into these broad categories that include education, housing, transportation, employment training and support, assistive technology and related services, personal support services, health, prevention and wellness, financial management, administrative services, legal fees and basic living expenses. If they enhance the health, independence and quality of life of the account owner, they are a QDE. Not all categories are disability specific, and they are not limited to items for which there is medical necessity, or those that only benefit the individual with a disability.
When a Veteran withdraws money from their ABLE account to pay for QDEs, it does not count as income and is not counted by means tested benefit programs. This is crucial for Veterans receiving VA Pension, as it ensures that they can access funds for necessary expenses, including emergency funds, without disqualifying themselves from these benefits. This makes ABLE accounts an effective way to manage non-covered additional expenses associated with living with a disability.
- Other Potential Uses
Some of the categories include QDEs which are already covered by VA services and support. A Veteran can maximize use of their ABLE account by limiting withdrawals to those not covered by other free programs. In lieu of certain types of retirement accounts, some Veterans use the ABLE account as a tax-free retirement account.
Strategic Considerations
Veterans can maximize the impact of their ABLE account by using it strategically to manage both their finances and benefits. Thoughtful planning allows Veterans to enhance their financial security and better prepare for future needs. Below are key strategic considerations for Veterans looking to get the most out of their ABLE account:
- Maximizing Benefits
Veterans can strategically use their ABLE account to manage income, ensuring they have funds for future needs while keeping their VA benefits. For instance, by saving money in an ABLE account, a Veteran can ensure they have funds available for future expenses, while maintaining eligibility for compensation, pension and other Veteran benefits such as aid and attendance.
Consider a Veteran who receives a modest VA Pension and has limited savings. By contributing to an ABLE account or receiving contributions from others, the Veteran can accumulate savings over time, ensuring they have funds available for unexpected or significant purchases, like a new vehicle or home repair or modification, without losing their pension. Veterans may also choose to seek out cost-free programs or sources of items or services they need before using funds in the ABLE account which allows funds to grow and be invested longer.
- Coordination with Other Benefits
ABLE accounts work alongside other benefits like Social Security and Medicaid. They do not replace these programs, but rather supplement them. By carefully managing their ABLE account, Veterans can ensure that they continue to receive all the benefits they are entitled to while securing additional financial resources.
- Consultation
While you do not need professional help to open or manage an ABLE account, Veterans with multiple financial accounts may wish to talk to a financial planner to set goals and improve their overall financial stability. An ABLE plan may offer options sold through financial advisors, though most do not. Use the ABLE comparison features tool and select “Financial Advisor Sold Plan” to compare this with your state of residence’s ABLE plan for fees and state-specific deductions and or credits.
Next Steps
Opening an ABLE Account:
Veterans who are interested in opening an ABLE account have several steps to take to ensure they select the best plan for their needs. Here are some key considerations:
- Using the ABLE National Resource Center Comparison Tools: Start by visiting the ABLE National Resource Center (ABLE NRC) website. There are three tools to help you to compare different ABLE plans. ABLE plans can be different in each state so it is important to pick one that best suits your needs. The comparison tools make it easy to see the differences, like fees and investment choices.
- State of Residence Considerations: Before selecting an ABLE plan, see if your state has its own ABLE program with extra benefits for residents who select that plan. Some states offer tax deductions or credits for contributions made to an ABLE account for state residents. For example, a Veteran might be eligible for a state income tax deduction if they contribute to their home state’s ABLE plan. This can provide additional savings and make a home state plan more attractive.
- Medicaid Payback: If a Veteran is receiving Medicaid, they may wish to review the Medicaid payback policy. Some states have provisions that prevent Medicaid from reclaiming funds from an ABLE account for those who select their state’s ABLE plan. This can be an important consideration for Veterans who have received Medicaid services since opening the account and are concerned about long-term financial security. This would not be an issue for Veterans who are not receiving Medicaid or do not anticipate receiving Medicaid because they receive comprehensive VA medical benefits. Upon the death of an ABLE account owner, outstanding QDEs, including funeral and burial expenses may be paid from the account. Then Medicaid may opt to request payback for Medicaid services received since opening of the ABLE account.
What to Look for in an ABLE Plan:
When choosing an ABLE plan, here are some things to consider:
- Fees: Compare the fees associated with different plans, including account maintenance fees, investment fees and any other charges. Lower fees can help your savings grow more.
- Investment Options: Most plans let you choose how your money is invested. Some plans offer conservative options like savings accounts, while others provide moderate or more aggressive investment opportunities. Choose one or more options that align with your financial goals and risk tolerance.
- Accessibility and Management Tools: Review the tools and services offered by each plan, such as online account management, mobile apps and customer service support. These tools can make it easier for Veterans to manage their ABLE account and track their savings.
- Program Flexibility: ABLE plans allow for the portability of accounts if a Veteran moves to another state. This is an option and not a requirement. Check whether the plan allows for easy transfers and what the conditions are for moving funds to another state plan.
Consulting with a Benefits Counselor or Financial Planner:
To make the most of an ABLE account, Veterans are strongly encouraged to consult with a benefits counselor or financial planner. These professionals can help Veterans understand how an ABLE account fits into their overall financial plan and how it interacts with all benefits they receive. Veterans who receive benefits from SSA and work or plan to work can receive free benefits counseling services. Each professional has different areas of expertise and can provide guidance in areas such as SSA work incentives, tax implications, contribution strategies and investment choices, ensuring that Veterans maximize the financial advantages of their ABLE account.
Enrollment Process:
Once a Veteran has selected an ABLE plan, the enrollment process is typically straightforward and can often be completed online. ABLE plans will ask the Veteran to self-certify that they receive a benefit from SSA, meet the age requirement for onset of disability or have a disability certification from their physician. They will also need to provide personal information and select their ABLE plan options such as debit card, checking account or investment options.
Ongoing Account Management:
After opening an ABLE account, Veterans should regularly monitor their account, make contributions as their financial situation allows and adjust their investment options if needed. Keeping the account active and well-managed ensures that Veterans can continue to benefit from the tax-free growth and protection of their VA benefits.
Conclusion
By carefully selecting the right ABLE plan and managing it effectively, Veterans can create a powerful financial tool that supports their needs and enhances their financial security while safeguarding their VA benefits and other critical benefits. The ABLE National Resource Center’s tools, along with state-specific considerations and professional advice, are critical components in making informed decisions about ABLE accounts.