CalABLE Update: DATE TBD, 2023: Our call center is currently open, however, due to the passing of former President Jimmy Carter, the NYSE has closed for the day and will reopen on DATE TBD, 2023. Any transactions placed today will receive a trade date of DATE TBD, 2023.
On April 7, 2023, we will be closed due to the holiday. We will return to normal business hours on Monday, April 10, 2023.
El 7 de abril de 2023 estaremos cerrados debido al día festivo. Regresaremos al horario laboral normal el lunes 10 de abril de 2023.
CalABLE Quarterly
January 2023
From the Director
A lot is going on in the world today. And with the aftereffects of a global pandemic, war abroad, violence, and tragedies dominating headlines and affecting the economy, it’s important to remember that your CalABLE account is designed to weather market volatility.
TIAA-CREF Tuition Financing (TFI), Inc. has managed CalABLE since its inception in 2018. TFI’s experienced investment team designs custom investment menus that take into consideration a long-term view and investor behavior during volatile times.
For those who need to use their funds right away to cover expenses, CalABLE’s FDIC Insured Option is offered through TIAA Bank. The FDIC-Insured Option preserves principal and credits accounts with an interest rate. Just over one-third of CalABLE’s assets are in the FDIC-Insured Option, which is not subject to the same market risks that generate headlines.
CalABLE also offers three target-risk portfolios—the Aggressive Growth Portfolio, Moderate Portfolio, and Conservative Portfolio, each with varying levels of equity for different risk and potential long-term return results. All three options include some fixed income allocation, and both the Moderate and Conservative portfolios include an allocation to the Funding Agreement. The Funding Agreement is a stable value, insurance-backed product that provides principal protection with a guaranteed crediting rate.
With more than 20 years of strategic investment experience in the 529 industry—and having weathered a number of different market environments over that time—TFI has applied experience, expertise and industry best practices to help investors achieve their savings objectives.
So, in these uncertain times, I remind you that CalABLE offers a variety of investment options that can align with your financial objectives and tolerance for risk. The CalABLE team and our partners are here to help you navigate today’s uncertainty.
Some states require you to be a resident to participate in that state’s ABLE program. However, many programs, including CalABLE, are open to all U.S. residents, no matter which state you live in. This provides the opportunity to choose the best program for your needs and circumstances. Across all ABLE programs, you can expect some similarities: all ABLE programs offer tax-advantaged accounts for people with disabilities, have the same eligibility requirements, and offer the same public benefits protection.
What may differ among the ABLE programs is program fees, features, and state laws. Additional state laws may provide a benefit to residents who open in-state ABLE accounts—availability and benefits vary by state. When deciding which ABLE program to join, you should research the ABLE program in your state first to see if there are additional laws or incentives that can help you.
If you live in California, there are additional laws that can benefit you if you open a CalABLE account. California has ensured disabled residents have the same opportunity to share their assets with their loved ones upon their death by passing a law that protects CalABLE accounts from Medi-Cal repayment.2 California has also passed a law that exempts CalABLE accounts from the enforcement of monetary judgements.3
The CalABLE Program is offered by the State of California. TIAA-CREF Tuition Financing, Inc. (TFI), program manager. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor and underwriter.
Tax Tips
You already know CalABLE accounts are tax-advantaged accounts when used for qualified expenses for people with disabilities.
Saver's credit*
CalABLE account designated beneficiaries may be eligible to claim the saver's credit for a percentage of their contributions. The beneficiary claims the credit on Form 8880, Credit for Qualified Retirement Savings Contributions (PDF). The saver's credit is a non-refundable credit available to individuals who meet these three requirements:
18 years old at the close of the taxable year
Not a dependent or a full-time student
Adjusted gross income falls within specified income requirements
Families may roll over funds from a 529 plan to another family member's ABLE account. The ABLE account must be for the same beneficiary as the 529 account or a member of the same family as the 529 account holder. Rollovers from a section 529 plan count toward the annual contribution limit. For example, the $17,000 annual contribution limit would be met by parents contributing $10,000 to their child's ABLE account and rolling over $7,000 from a 529 plan to the same ABLE account.
*These tax tips are made available to you as an educational, self-help tool and are intended to provide you with a basic guideline to help you create a savings and investment plan for your CalABLE account. It is not intended for specific advice. These tax tips should not be the sole or primary basis on which you make your investment decisions. Please review the Program Disclosure Statement (PDF) for more detailed information on CalABLE’s investment options and consider consulting a financial professional for help with your unique circumstances.↩
Free. Free. Free.
Free tax preparation services known as Volunteer Income Tax Assistance (VITA) programs are available to members of the disability community.
The IRS VITA program offers free tax help to people who make $58,000 or less, persons with disabilities, the elderly, and limited English-speaking taxpayers who need assistance preparing their tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.
The California State Controller works with the IRS and other agencies to make the VITA program available in communities throughout California. Assistance is generally available from February 1 through April 15. Dates and times vary by location, and some VITA sites require appointments. Find a VITA site closest to you.
CalABLE Questions
Here are three questions we get from both new and longstanding account owners alike.
Q: How do I prove I’m spending my money on qualified disability expenses?
A: It’s up to you to track how you spend the money in your CalABLE Account. We won’t ask you how you plan to spend your money. However, the IRS may ask you to verify your expenditures. Be sure to keep good records of how you are spending your CalABLE funds.
Q: What if I use my CalABLE funds for something that isn’t a qualified disability expense?
A: You may have to pay income taxes, plus a 10% additional federal tax and a 2.5% California state tax on the earnings portion of any withdrawal not used for qualified disability expenses. Additionally, the non-qualified funds you withdraw may be counted against you for purposes of determining your eligibility for public benefits programs like Supplemental Security Income (SSI).1
Q: Can I use CalABLE funds for housing and rent?
A: Yes. But if you receive SSI benefits, be sure to immediately spend money you withdraw for housing expenses to avoid any negative impact on your SSI. As long as you spend the housing funds within the same calendar month you withdraw the money, the housing payments will not affect your SSI benefits.2
1If funds aren't used for qualified expenses, the earnings portion of a non-qualified withdrawal is subject to federal income tax, possibly including the additional federal tax. Non-qualified withdrawals may also be subject to state and/or local income tax. For those beneficiaries subject to California income tax, the earnings portion of a non-qualified withdrawal is subject to California income tax and the additional California tax.↩
2Money you withdraw for housing expenses may affect your SSI benefits if you do not spend it right away. To avoid any impact on your SSI benefits, be sure to spend housing money within the same calendar month that you make the withdrawal.↩
A Quick Survey
We want to help you achieve your savings goals.
Our goal is to support you and help you achieve your savings goals through the many resources we offer, including webinars, our quarterly newsletter, our website, our social media posts, and more. To better serve you, we’d like to learn more about the kind of CalABLE information that matters to you the most.
This material is for informational or educational purposes only and does not constitute legal or tax advice. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Be sure to consult with your tax professional for details and advice.
