Recovery Options: Tax-Free Savings Accounts

  • President Barack Obama signed into law the Achieving A Better Life Experience, or ABLE, Act. The law allows individuals with mental illnesses whose onset of disability occurred before age 26 to fund a tax-free savings account with up to $14,000/year up to a total of $100,000. The money in the account can be used to pay for qualified expenses such as health care, education, and housing.

     

    Individuals with blindness or physical or mental illnesses will be able to open up an ABLE account without losing their SSI or Medicaid benefits.  In calculating eligibility for SSI or Medicaid, the ABLE account will not be factored in either.

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    The age of 26 refers not to the onset of the illness, rather it is linked to the point at which the Social Security Administration (SSA) deemed a person to be so disabled that they became eligible for SSI benefits.

     

    For a lot of people with schizophrenia and other mental illnesses, they receive SSI benefits long after they first have an episode. The age requirement was placed in effect because the Act's cost would exceed more than $20 billion over the coming decade. The projected cost was lowered to $2 billion.

     

    The bill's sponsors were forced to accept this restriction in order to pass the Act into law. NAMI and other interested parties are working in 2015 to remove this restriction.

     

    My point is that a person shouldn't think they automatically need to collect SSI the rest of their lives. If this kind of protection were put in place a person with schizophrenia or another mental illness could fund their college education. With a degree in hand, they could find a better job and hopefully quickly come off the SSI rolls and not have to collect disability benefits for the long-term.

     

    This is something to think about: not collecting SSI the rest of your life. If at all it's possible to get some kind of paid job with health insurance, or to get a job and fund your own health insurance, I recommend doing this rather than collecting SSI.

     

    Call your elected official for more details about the ABLE Act. It might be that you have to show receipts and invoices for the qualified expenses before you can withdraw the money from the account.

     

    This is one case where the government has done the right thing halfway right.

     

    Stopping disability before it progresses IS possible. With funds from an ABLE account, a person with schizophrenia or another mental illness CAN have a better life experience.

     

    Getting the right treatment right away might prevent a young person from needing to collect SSI in the first place.

     

    Passing the ABLE Act might lead ironically to a rush of people trying to claim SSI benefits before they turn 26. Thus the cost to the government will go up either way.

     

    If you're eligible for this kind of tax-free savings account, act now to set it up. If at all you can't hold a paid job, you deserve to have this protection in place so you can at least fund a better quality of mental and physical healthcare.

Published On: January 18, 2015