Federal employees and military families face unique financial planning challenges—frequent moves, deployments, survivor planning, and complex benefit coordination. For families raising a child with a disability, or caring for a disabled spouse or veteran, those challenges multiply.
One of the most powerful—and most overlooked—tools available is the ABLE account (Achieving a Better Life Experience account). When used correctly, ABLE accounts allow eligible individuals with disabilities to save and invest money without losing means-tested benefits, while also providing tax advantages and exceptional flexibility.
For FERS retirees, active federal employees, and military families, ABLE accounts can play a critical role in:
- Preserving SSI and Medicaid
- Coordinating with VA disability benefits
- Supporting special-needs children into adulthood
- Protecting long-term family financial security
What Is an ABLE Account?
An ABLE account is a tax-advantaged savings and investment account for individuals with disabilities. It works much like a 529 college savings plan—but instead of education only, ABLE funds may be used for a broad range of qualified disability expenses.
To be eligible:
- The disability must have begun before age 26 (rising to age 46 starting in 2026)
- The beneficiary must meet SSI disability standards or have a qualifying physician certification
The account is owned by the person with the disability, not the parents—an important distinction for benefit eligibility.
Why ABLE Accounts Are Especially Valuable for FERS and Military Families
1. They Do NOT Disqualify SSI or Medicaid (Within Limits)
Balances up to $100,000 in an ABLE account are ignored for SSI, and Medicaid eligibility generally continues regardless of balance.
2. They Coordinate Cleanly with VA Disability and Survivor Benefits
ABLE accounts do not interfere with VA compensation, DIC, military survivor benefits, or FERS survivor annuities.
3. Tax-Free Growth for Disability-Related Expenses
Earnings grow tax-free, and withdrawals are tax-free for qualified disability expenses such as housing, transportation, healthcare, education, and assistive technology.
4. They Pair Perfectly with Special Needs Trusts for Federal Families
ABLE handles day-to-day support, while a Special Needs Trust (SNT) protects large inheritances from TSP, FEGLI, SGLI, or private life insurance.
An ABLE Estate Planning Case Study
The Family Profile
- Parents: Dual-income federal employees under FERS
- Ages: 58 and 56
- TSP Balance: $1,050,000 (traditional)
- Life Insurance: $400,000 (FEGLI + private policy)
- Child: 22-year-old son with a developmental disability
- Benefits: Receives SSI and Medicaid
- Goal: Provide lifetime financial support without destroying benefits
The Planning Problem
If their son inherited even $10,000 directly, he would:
- Lose SSI
- Lose Medicaid
- Be forced to privately fund all medical and support services
A direct inheritance of TSP or life insurance proceeds would instantly dismantle his safety net.
The Three-Layer Federal Planning Solution
1. ABLE Account for Monthly Living Support
- Funded annually at the contribution limit
- Used for rent, transportation, assistive technology, therapy, and job coaching
- Does not affect SSI or Medicaid under $100,000
2. Special Needs Trust (SNT) for Large Assets
- TSP and life insurance beneficiaries retitled to a third-party SNT
- Receives:
- Life insurance proceeds
- Remaining TSP balances
- Pays for long-term housing, special care, and supplemental needs
- Preserves full SSI and Medicaid eligibility
3. ABLE as the Spending Bridge
- Trustee transfers modest sums from the trust into the ABLE account
- Son uses ABLE debit card for approved expenses
- Prevents accidental SSI reductions and Medicaid suspensions
What Would Have Gone Wrong Without ABLE
- Trust payments for housing and food would count as in-kind support
- SSI could be reduced or suspended
- Medicaid interruptions would be likely
- Daily expenses would become administratively complex
The ABLE account became the critical buffer layer that made the entire estate plan function smoothly.
The Outcome for the Federal Family
- Lifetime SSI and Medicaid preserved
- Over $1.4 million in federal retirement and insurance assets protected
- Continuous housing and care funding secured
- No guardianship court supervision required
- Full FERS survivor planning maintained
Key Lessons from the Case
- Never name a disabled child directly as a TSP or FEGLI beneficiary
- Use ABLE for spending, not inheritance
- Use a Special Needs Trust for wealth transfer
- Coordinate FERS + TSP + insurance together
- Review beneficiaries after promotions, deployments, remarriage, or retirement
Contribution Rules FERS and Military Families Must Know
- Annual ABLE contribution limit: $19,000 (2025); $20,000 (2026)
- Working beneficiaries may contribute additional income under the ABLE to Work Act
- Lifetime caps tied to state 529 limits (often $300,000–$550,000)
- Anyone can contribute: parents, grandparents, fellow service members, or the beneficiary
Why ABLE Is Especially Important for Military Families
- Portable across state lines for PCS moves
- Works alongside VA disability and TRICARE
- Ideal for wounded warriors transitioning to civilian life
- Shields savings from benefit disqualification
ABLE vs. 529 for Federal and Military Families
| Feature | ABLE Account | 529 College Plan |
| Tax-free growth | Yes | Yes |
| Purpose | Disability expenses | Education only |
| SSI/Medicaid protected | Yes | No |
| Ownership | Beneficiary | Account owner |
| Housing allowed | Yes | No |
| Long-term adult use | Yes | Limited |
Limitations and Cautions
- Annual funding caps
- State-specific investment menus
- Potential Medicaid payback at death
- Not a substitute for a full Special Needs Trust for large estates
The Bottom Line for FERS and Military Families
ABLE accounts provide something rare in planning: a way to save, grow, and spend money without losing essential disability benefits.
For federal and military families, ABLE accounts offer:
- Protection of SSI and Medicaid
- Coordination with FERS, VA, and survivor benefits
- Tax-free funding for real-life disability expenses
- A crucial layer of estate and survivor protection
Despite these advantages, ABLE accounts remain dramatically underused in the federal and military community.
For families who qualify, an ABLE account is not just a savings tool—it is a benefit shield, an independence engine, and a permanent planning solution for families whose financial stakes are already high.
If you would like a list of Recommended Online ABLE Resources, contact the author via LinkedIn.
ABLE Account Resources
- ABLE National Resource Center – What Are ABLE Accounts?
- ABLE NRC – Compare State Programs
- How to Open an ABLE Account
- IRS – ABLE Accounts: Tax Benefit for People with Disabilities
- National Disability Institute – ABLE Overview
FERS & Military-Specific Disability and Survivor Resources
- FERS Survivor Benefits Overview
- TSP Beneficiary Designations
- FEGLI Life Insurance Program
- VA Disability Compensation
- Military Survivor Benefit Plan (SBP)
- Special Needs Alliance – ABLE vs Special Needs Trusts
FERS & Military Beneficiary Planning Checklist
- Review TSP beneficiaries – never name a disabled child directly.
- Update FEGLI / SGLI beneficiaries after promotions, marriage, or divorce.
- Establish a Third-party Special Needs Trust for large inheritances.
- Fund ABLE annually for day-to-day qualifying disability expenses.
- Coordinate VA disability and survivor benefits with ABLE planning.
- Confirm survivor elections under FERS or Military SBP.
- Avoid naming minor or disabled heirs outright on retirement accounts.
- Re-audit all beneficiary forms every 3–5 years.
- Coordinate ABLE usage with Medicaid and SSI compliance rules.
- Consult a certified special needs planning attorney. This customized resource is intended for educational use only. ABLE account rules, SSI, Medicaid, FERS, TSP, VA, and military survivor benefits are governed by federal and state law and change.
