Confused about whether an ABLE account or a 529 plan fits your goals? This guide explains how each works, who qualifies, what expenses they cover, and how they can complement each other.

An ABLE account and a 529 plan are both tax-advantaged savings tools, but they serve different purposes. An ABLE account is designed for eligible individuals with disabilities to save and invest for disability-related expenses while protecting access to means-tested benefits. A 529 plan is primarily an education savings vehicle intended to fund qualified education expenses for a named beneficiary. Understanding the intent of each account is the first step to choosing the right one—or using both in a coordinated way.

Eligibility and funding differ. An ABLE account is available to individuals who meet disability criteria and whose disability began before a specified age; federal law expands the onset-age threshold in 2026, broadening eligibility. Contributions to both account types are made with after-tax dollars, earnings grow tax-deferred, and qualified withdrawals are federally tax-free; some states also offer tax deductions or credits for 529 plan contributions and, in some cases, for ABLE contributions. Investment options, fees, and state tax treatment vary by state program for both account types.

Spending rules are not the same. ABLE account funds can be used for a wide range of qualified disability expenses—such as housing, transportation, assistive technology, and basic living costs—and properly used distributions are generally disregarded for Supplemental Security Income and Medicaid resource limits, subject to specific federal rules. A 529 plan limits tax-free withdrawals to qualified education expenses (for higher education and, in limited ways, certain K–12 and training costs), and nonqualified withdrawals may face taxes and penalties. Always check your state’s definitions, since state tax treatment can be narrower than federal rules.

These accounts can complement each other. For a student with a disability, a 529 plan can target tuition and fees while an ABLE account covers everyday support needs that help the beneficiary pursue education and independence. Current federal law allows limited rollovers from a 529 plan to an ABLE account for the same beneficiary or qualifying family member through the end of 2025 unless extended, subject to annual contribution caps and other conditions—offering a bridge between the two tools. Compare program fees, investment menus, and state tax benefits, and consider working with a qualified advisor to tailor a plan to your goals.