By: Ryan Fitzgerald, CFA, Principal, Sellwood Investment Partners LLC
Choosing to open an ABLE account is a good step toward financial independence. An ABLE account is more than just a place to put money; an ABLE account is a tool that allows people with disabilities to save for the future without losing access to vital state and federal benefits like Supplemental Security Income (SSI) and Medicaid. Once the account is open and the first few dollars are deposited, a big question often comes up: How should I invest in my ABLE account to reach my goals? Understanding your ABLE investment options can help you make choices that balance safety, growth, and benefit protection.
In this part of our series, we will look at how ABLE investment options work. We will explore the different types of portfolios, how to decide which one fits your life, and why investing inside an ABLE account can help you reach your goals better than other saving options.
Understanding Your ABLE Investment Options
When you log into your ABLE account, you will see a few different places where you can put your money. Most plans group them by how much “risk” they have. In the investment world, risk means the chance that the value of your money might go down over time.
1. Cash or Money Market Option (Lowest Risk)
The cash or money market option is the most careful way to save. Your money is relatively safe, either in an FDIC-insured bank account or a money market fund. These types of accounts grow more slowly. This is the most popular option nationally, with roughly 40% of all ABLE dollars invested this way according to ISS Market Intelligence.
The cash or money market option is the best choice if you plan to spend your money in the near term, for things like upcoming rent, utility bills, and groceries. Think of this as your “ready now” money because it’s ready to be used immediately when you need it. Personal finance experts typically suggest adding money to this type of investment before investing additional money into higher risk (and potentially higher returning) options.
Yields on Cash or Money Market Option: The yields, or the interest you earn on your money, can change a lot depending on the plan you choose. The higher the yield, the more interest you earn on your money and the more your money grows:
- Lower-Yield Options: Some ABLE plans offer cash or money market options with yields comparable to national average checking account rates, which are currently below 1.0% per year as of December 2025.
- Higher-Yield Options: Other ABLE plans offer higher yields. For example, the National ABLE for All Savings offers a cash option yielding 3.6% per year as of December 2025.
Compare a Plan’s Yield with Your In-State ABLE Plan Tax Credits:
Many states offer a tax incentive to encourage residents to save in their own state’s ABLE plan. If you choose a cash or money market option from an out-of-state ABLE plan, you should compare the benefit of the account’s yield with the potential in-state tax savings. A higher yield on a cash account might earn you a few extra dollars over the course of a year. However, an in-state tax credit or deduction can provide you with financial benefit.
When deciding where to open an account, you should consider the value of these guaranteed in-state tax advantages with the potential yields of different plans. While an out-of-state plan might offer a higher annual interest rate on its cash option, the total earnings from that yield over a year may be significantly less than the value of an upfront state tax credit or deduction. Choosing a plan solely based on its investment fund options or a slightly higher yield could mean leaving valuable state tax benefits on the table.
2. Target-Risk Portfolios (Professionally Managed Options)
Another option available through most ABLE programs is target-risk portfolios. Target-risk portfolios are professionally managed “all-in-one” mixes of stocks and bonds. These plans are used for medium to long-term needs/expenses such as a vehicle, tuition, house down payment and retirement). Unlike other savings programs where you choose individual funds to invest in, the ABLE plan manager does it for you. These ABLE investment options create a diversified portfolio for you once you choose your risk level.
Unlike the cash or money market option, a target-risk portfolio’s value will fluctuate with the stock and bond markets. All target-risk options have more risk than the cash or money market option. The more aggressive the target-risk portfolio, the more the value can change. Most plans offer a handful of target-risk options, varying from conservative to aggressive:
| Investment Option | Return and Risk Potential | Typical Investment Mix |
|---|---|---|
| Cash or Money Market Option | Lowest | Cash equivalents |
| Target-Risk Conservative | Low | More bonds than stocks |
| Target-Risk Moderate | Medium | A balanced mix of stocks and bonds |
| Target-Risk Aggressive | Highest | Mostly stocks, some bonds |
A saver might choose to fill their “ready now” bucket with money in the cash or money market option and then allocate additional money to go into savings in one of the target-risk portfolios for longer-term investment. Money in the cash and money market option gives savers a buffer to withstand market fluctuations that will likely happen in the target-risk portfolios.
3. Individual Funds (Advanced Option)
Some plans, like Florida’s ABLE United, let “do-it-yourself” savers build a custom portfolio by picking specific funds. Savers can choose options like a “U.S. Stock Fund”. This option is generally used by more experienced investors who want precise control over their allocation between stocks and bonds.
It is important to note that while this type of account allows you to pick specific funds to invest in, it is not the type of investment account where you can buy and sell on a daily, weekly, or monthly basis. This type of account is still a long-term investment account and like all ABLE accounts has limits to the number of changes that can be made to it (See other considerations below).
Investing Inside vs. Outside an ABLE Account
For people with disabilities, ABLE accounts offer one of the most effective tax-advantaged ways to save.
The Pros of Investing Through an ABLE Account
- Protects Your Benefits: Usually, if you have more than $2,000 in a regular bank account, you could lose Supplemental Security Income (SSI) benefits. Money in an ABLE account (up to $100,000) does not count toward that limit so you can safely save your money and still be eligible for SSI. Any amount of ABLE funds can protect your eligibility for other federal public benefit programs (such as HUD Housing Assistance, Medicaid, and Food Assistance).
- Tax-Free Growth: In a traditional investment account, you pay taxes on realized gains every year. In an ABLE account, your money grows tax-free each year, and withdrawals are also tax free if used for “qualified disability expenses.”
- State Tax Perks: In addition to the benefit protection and tax advantages mentioned already, many states also offer tax credits or deductions for those saving in ABLE accounts.
Other Considerations:
- Contribution Limits: For 2026, the standard contribution limit is $20,000 (plus extra if you are working).
- Limited Investment Changes: You can only change your investment strategy (i.e., move your money to another investment option or account) twice in a calendar year.
- Fees: Most ABLE plans have an annual fee and other potential usage fees. It’s important to review the plan’s program disclosure booklet to find out what fees might apply to you.
Common Mistakes to Avoid with ABLE Investing
- Leaving money in the cash or money market option too long
Cash feels safe, but over time, inflation can quietly reduce purchasing power. For money you won’t need in the near term, leaving all funds in cash may mean missing out on larger investment gains. - Taking Too Much Risk for Near Term Needs
Target-risk options can lose value in bad market years. If you need to withdraw money soon, consider holding it in the cash or money market option. - Ignoring State Tax Benefits
Choosing a plan solely based on the fund options could mean missing out on valuable state tax credits or deductions. - Forgetting the Two-Change Rule
ABLE plans often limit you to two investment changes per year.
Summary and Next Steps: Choosing the Right ABLE Investment Strategy
Building a secure future with an ABLE account starts with matching your investments to your specific goals. ABLE plans offer a lot of options that can help you plan for future expenses.
Key Takeaways:
- Identify how you want to use your money: Are you saving for next month’s bills or to buy a home in ten years?
- Match your timeline: Use the lowest risk cash or money market option for near-term needs and the target-risk portfolios for longer-term investments.
- Assess your risk level: Decide how much risk you want your money to have. Only choose the target-risk options if you are comfortable staying invested through market ups and downs.
- Check for state benefits: Don’t forget to compare the ABLE plan’s investment options with your state ABLE plan’s tax credits or deductions.
By taking these steps, you can ensure your ABLE account is not just a place to keep money, but a tool to help you meet your goals and increase independence.
Learn More:
Visit the ABLE National Resource Center to explore state ABLE plans, tax benefits, and tools to help you compare your options.
Disclaimer: This article is for informational purposes only and does not constitute tax, legal, financial, or investment advice. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks.
