January 26, 2026
Moving Retirement Money to an ABLE Account: A Guide for Families
As a Special Needs Certified Financial Planner®, I often hear from families who want to know if they can simplify their finances by sending money directly from a retirement account to an ABLE account. Specifically, they ask about the "Required Minimum Distribution" (RMD)—the money the government says you must take out of your IRA or 401(k) every year once you hit a certain age.
The short answer is: No, you cannot set up a direct transfer or "auto-deposit" from an RMD account into an ABLE account.
While you can certainly use your retirement savings to fund an ABLE account, there is a specific two-step process you must follow to stay within the rules.
Why You Can’t Use a Direct Transfer
The IRS treats these two types of accounts very differently. An RMD is considered "taxable income." This means the government sees it as money you are earning or receiving right now, and they want to tax it before you do anything else with it.
On the other hand, an ABLE account is a place where you put money that has already been taxed. If you tried to send the money directly, you would be skipping the "income tax" step, and the IRS does not allow that.
Need help navigating these complex IRS rules? Click here to schedule a consultation with a Special Needs CFP® today.
The Correct Way to Fund Your ABLE Account
Since a direct move isn't allowed, you have to take the "scenic route." Here is the professional way to handle this transition:
- Take the Distribution First: You must first withdraw the RMD from your retirement plan. That money should go into your regular checking or savings account.
- Report the Income: Because this is a withdrawal, you will receive a tax form at the end of the year. You will owe taxes on this money just like a paycheck.
- Make the ABLE Deposit: Once the cash is sitting in your bank account, you can then write a check or make an electronic transfer into the ABLE account.
Keep an Eye on Yearly Limits
It is important to remember that ABLE accounts have a "ceiling" on how much you can put in each year. For most people, this limit is tied to the federal gift tax exclusion (currently around $18,000 per year). Even if your RMD is $50,000, you can only put the allowed yearly maximum into the ABLE account. The rest must stay in your regular bank account or be used for other expenses.
If you aren't sure how much you can contribute this year, contact our office for a personalized financial review.
How This Affects Your Government Benefits
The biggest reason families want to use ABLE accounts is to protect eligibility for programs like Supplemental Security Income (SSI) or Medicaid. These programs usually have a $2,000 limit on how much money you can own.
When you take your RMD, that money counts as "income" for that month. If it stays in your regular checking account, it could push you over the limit and cause you to lose your benefits. However, as soon as you move that money into an ABLE account, it becomes "invisible" to the Social Security Administration (up to a $100,000 limit).
This makes the ABLE account a powerful tool, but you must be careful with the timing of your transfers so you don't accidentally lose your monthly checks.
Final Thoughts for Families
Managing a disability and a retirement plan at the same time is like solving a difficult puzzle. While you can't link these accounts directly, using your retirement savings to grow an ABLE account is still a smart strategy for long-term security.
Ready to create a roadmap for your family’s future? Reach out to a Special Needs Certified Financial Planner® today to get started.