December 28, 2017

How a CPA thinks about maxing out ABLE United contributions

How a CPA thinks about maxing out ABLE United contributions

I’m writing about ABLE United today from two points of view, both of which I hope you find to be helpful. First, as a certified public accountant, it’s my job to help clients make informed, prudent decisions about their finances. Second, I’m a parent to five children, including a son with Down syndrome. In that role, together with my wife, Juliana, it’s my privilege to seek ways to enrich all of our children’s lives in all the ways a parent can – that includes teaching our kids about money and making provisions for their future.

Early on, we decided one of those provisions would be a college education, and we purchased Florida Prepaid College Plans for four of our children. But while we are certainly not ruling out college for Owen, our 5-year-old who has Down syndrome, we wanted to save for his future in a commensurate but more flexible way.

Florida’s ABLE United account fit the bill perfectly. And I mean Florida’s, specifically. As someone whose job is to become familiar with codes, loopholes, and fresh fiscal opportunities, I considered the possibility of opening an ABLE account in another state. But after research, we settled on a Florida account, because the fee structure was far superior here than elsewhere. In fact, Florida’s ABLE United program has never required an enrollment fee and it was recently decided there will not be a monthly maintenance fee, either.

We contribute to Owen’s ABLE United account in the same manner in which we contribute into our other children’s Prepaid accounts. And while we’re on the subject of Prepaid, know that I take comfort in knowing that the Florida Prepaid College Board administers the ABLE United program. This longstanding Florida agency has proven itself to have strong controls and trustworthy oversight in managing extensive assets. Administrators are then able to leverage all of that money to get favorable terms for everyone.

How much should you contribute to an ABLE United account? As a CPA, I can tell you it’s wise to max out your contribution if that’s possible. Encourage family members to help you by making deposits instead of giving traditional gifts. This year, the maximum annual contribution is $14,000 (2017), and next year the maximum will rise to $15,000 (2018). Why contribute the max? You can’t go back in time. It’s like investing in a 401k. If you can’t contribute $18,000 this year, it’s not like next year you can contribute $36,000. The annual maximum is the maximum, and you’ll never get that time back.

Now as a parent, do I max out our ABLE United account for Owen? I wish! And you probably wish you could, too. But even if you can’t, I encourage you to do what we decided to do: something. Do something. Planning for the future is always important. So is not wasting time. The keys to success are the compound interest, the slow and steady, the long-term thinking.

When we make our monthly contribution into Owen’s account, we’re really thinking ahead to when he’s living independently, perhaps 20 years into the future. Just like we’re saving for our own retirement, this is like saving for him to have independence.

For him to have some control over his life. And we’re not waiting for a windfall to get started. We’re not waiting for the day that I get a big raise. We’re just saying, “This is what we can do now.”

The question is: What can you do now?

Scott Mattson is a CPA with Assurance Dimensions Certified Public Accountants in Jacksonville, Fla.

*This is a personal testimony and is not formal investment, tax, or legal advice.