The Basics
An Individual Development Account (IDA) is a type of account that allows you to save up money to buy a home, pay for higher education, or fund your small business. To open an IDA, you must find an IDA program in your area and meet certain eligibility requirements.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Eligibility requirements vary. Usually, your annual income must be within 200% of the Federal Poverty Level ($30,120) and you must have some form of earned income. You must also take financial education training once you’re enrolled in the program.
The biggest benefit of an IDA is that, after you have been enrolled for a sufficient amount of time, matching funds will build up for you with the IDA program. Once you are in good standing, have completed all of the financial literacy classes, and are ready to start using the money in your IDA, the IDA program will pay your matched funds directly to the school, business, bank, or whomever you need to pay to achieve your goal. Another benefit is that some federally funded IDA programs allow you to save up money without having to worry about asset limits for Supplemental Security Income (SSI) and or other programs.
José is in an IDA program which offers a 2:1 match. That means that for every dollar he puts into his account, he gets $2 from his IDA program. He decides to deposit $50 into his account each month for 6 months.
José’s deposits: 6 months x $50 = $300
His IDA program’s match is: 6 months x $100 = $600
The total amount of money available to Jose at the end of 6 months:
| $300 |
| +$600 |
| $900 |
The IDA allows José to save 3 times as much money as he otherwise would have done. It’s enough money for him to start attending community college in the fall.
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Eligibility
An Individual Development Account (IDA) is a savings account for low-income workers that can be used to fund a small-business development, get a higher education, or buy a first home.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Each IDA program one is unique and has slightly different eligibility requirements and operating procedures. One of the biggest benefits of setting up an IDA account is the matching funding that is offered under the program; IDA programs match your total savings when you reach your agreed-upon savings goal. In general, for every dollar you deposit into your account, your IDA program will match you with somewhere between $1 and $4, depending on the program.
For example, if you have an IDA with a 3:1 match and you deposit $25, your IDA program would contribute an additional $75 towards your savings goal. You would have a total of $100! This makes the program a very effective way to save for a specific goal.
Program Eligibility
Each IDA program is different and eligibility requirements vary from program to program. Generally, most have the following requirements:
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Your annual income must be 200% of the Federal Poverty Level ($30,120 for an individual, $40,880 for a couple) or less.
- Exception: In some cases, you may qualify if your income is 65-85% of the median income in your area.
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You must have earned income from a job.
- Exception: Some IDAs that are not funded by the federal government may have slightly different earned income requirements and allow you to have income from other sources.
- You must attend free financial literacy training. These classes usually cover topics such as money management, debt reduction, developing a savings plan, credit, and investing.
Some programs also have additional restrictions:
- Asset limits
- Based on your credit history
- Based on whether or not you are a citizen or legal resident
Joanna is single and makes $30,000 per year. She doesn’t qualify for most IDA programs, because she makes more than 200% of the Federal Poverty Level ($30,120). However, Joanna found one IDA program that accepts people who make up to 85% of the median income in the area. Since the median income in her area is $40,000 per year, she qualifies for this program because she makes less than $34,000 (85% of $40,000).
IDA Savings Limit
Most IDA programs only allow you to have a certain amount of money be matched by your IDA account — usually around $4,000. The exact amount you can save will depend on the program you are using. You can deposit more money into your savings account, but only the goal amount will be matched.
Rosa is enrolled in an IDA program with a 3:1 match and a $4,000 savings cap. She deposits a total of $1,000 into the account and gets an additional $3,000 in matching funds. At that point, she has reached the $4,000 limit and doesn’t have to deposit any more money into the account. She’s reached her goal amount and can spend her money on her goal purchase.
How to Apply for an IDA
If you are interested in starting an IDA, find an IDA program in your area. You can find good IDA program directories at the Prosperity Now and the Assets for Independence Resource Center.
Some programs may have waiting lists. Even so, you may be able to begin the process by taking financial literacy training while waiting for a space to open up.
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How IDAs Work
Once you’ve decided to do an Individual Development Account (IDA), you must take several steps to enroll in an IDA program:
- Decide how much money you plan to save up and what you are going to do with it. You could use the money for something that will help you with your education, with your small business, or with buying a home.
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Locate an IDA program in your area. There are IDA program directories at the Prosperity Now and the Assets for Independence Resource Center.
-
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
-
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Find out as much as you can about the IDA program you are considering.
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What is the source of the program’s funding? Is it federally funded?
- If the IDA program is federally funded, money deposited and matched in that account will not be counted by Supplemental Security Income (SSI). That means it will not impact your benefits. The importance of this is explained in detail on the next page.
- If you enroll in an IDA that is not funded by the federal government (one funded by a nonprofit or private company, for example), money deposited and matched in your IDA may jeopardize your Supplemental Security Income (SSI) benefits.
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Does the program fund the goal you decided upon in the first step?
- Federally funded programs only allow you to save for small business developments, higher education expenses, and the purchase of a first home.
- Some privately funded IDAs may allow you to save for other goals like buying a new computer or car.
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What is the source of the program’s funding? Is it federally funded?
- Once you have found an IDA program that is suitable for you, attend an orientation meeting to learn more about it.
- If you decide to enroll, supply the required personal and financial information to verify your eligibility for the program.
Once you have enrolled and been accepted into the IDA program, you will be assigned an IDA caseworker who will help you with your account. You’ll open a savings account with a bank or credit union that is tied to your IDA program. Depending on the program, you may need to deposit a certain amount of money into your account each month.
Some IDA programs allow you to change your savings goal, once. So before you set up your account, you should discuss with your IDA caseworker if you can change your savings goal later on. And notify your caseworker as soon as you think your goal may be changing. Keeping everyone informed is key!
In most programs, there is a minimum amount of time that you must be enrolled before the matching funds start to accumulate: 6 months for a business or educational goal, 10 months if you want to buy a home. Once you have fulfilled the minimum requirements, you’ve saved the agreed-upon amount every month for 6 or 10 months, and you’ve taken the financial literacy workshops, you can start to spend your money. At that point, the IDA program will calculate your matched amount and make a payment to your goal. Some IDAs don’t put money directly into your savings account. This is to avoid any illegal or dishonest behavior. The matching amount will not be available until you have met all requirements, are in good standing, and are ready to make your purchase.
Most people keep using their IDA accounts for 1 to 3 years, but some programs allow you to keep your account open up to 5 years.
If you enroll in an IDA program, but do not fulfill its requirements, you may become ineligible to access the matching funds offered by the program. Be sure to review the requirements of your program carefully with your IDA caseworker.
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IDAs and Other Programs
Supplemental Security Income (SSI)
If you are getting Supplemental Security Income (SSI) and plan to enroll in an IDA, it is very important that you find out who funds that IDA program.
If you are on SSI, it is highly recommended that you enroll in a federally funded IDA rather than an IDA funded by some other source. If you choose an IDA program that is federally funded, your SSI will not be affected by the assets you save in your IDA account. However, if the IDA program you choose is not federally funded, you may become ineligible for your SSI benefits because your IDA account could cause you to go over their assets limits.
The two federal programs that fund IDAs are Temporary Assistance for Needy Families (TANF) and the Assets for Independence Act (AFIA). However, you do not need to be enrolled in those programs to have an IDA funded by them.
When you enroll in a TANF- or AFIA-funded IDA, be sure to ask your IDA caseworker to write a letter on their program letterhead stating that you are participating in an IDA program that is federally funded. The letter should specifically mention the “Exclusions under Other Federal Statutes” clause. Give a copy of that letter to the Social Security Administration (SSA) for documentation and keep a copy of it for yourself.
Plans to Achieve Self-Support (PASS)
A Plan to Achieve Self-Support (PASS) is an SSI program that allows you to save up money for a specified and SSA-approved work goal, such as starting a new business or getting a different job that will ultimately help you to lower or stop the cash benefits you get from SSI, Social Security, or both. The money you save in a PASS does not count against SSI's income and asset limits. If SSA approves your PASS, they will not count the money you spend on your PASS goal (such as business equipment or education expenses) when they figure out if you qualify for SSI. If you are already eligible for SSI, you will get higher SSI cash benefits, which will replace all of the money you spend on your PASS.
This means you can save money towards a career goal in a PASS and continue to use SSI benefits for basics like food and rent.
An IDA can be a part of your PASS plan; the only requirement is that your goal be the same for each program. One of the benefits of using both programs together is that it allows you to set up a nonfederally funded IDA without threatening your SSI benefits. As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI and you won’t lose those benefits.
IDAs and Social Security Disability Insurance (SSDI)
If you get Social Security Disability Insurance (SSDI), you can enroll in any IDA program that you choose. There are no restrictions.
The Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a federal tax program that reduces the amount of income tax owed by low- to moderate-income workers and families. If you get the EITC, you can deposit that money into your IDA and your money will get matched, helping you reach your goal more quickly.
Another Way to Save: An ABLE Account
If your disability began before you turned 26, you can open an ABLE account where over time you can save up to $100,000 in resources and not have them counted by SSI and most other programs with resource limits. The money in an ABLE account gets tax advantages similar to the way retirement accounts work, but can only be spent on approved disability expenses, such as education, housing, or transportation. To learn more about ABLE accounts, read DB101's article on Building Your Assets and Wealth.
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Example
Jennifer’s Story
Jennifer was working and earning $500 per month at a part-time job. Her only other income came from her monthly Supplemental Security Income (SSI) benefits.
Jennifer called up a benefits planner because she wanted to learn more about how her work income impacted her SSI benefits. She also mentioned that she hoped to be able to save up some money to go back to school, but was worried about going above SSI’s asset limit.
Jennifer's Benefits Planner helped explain to her how her SSI benefit was currently being calculated.
| Jennifer's Monthly Earned Income | $500.00 |
| Minus the $20 SSI General Income Exclusion | - $20.00 |
| Minus the $65 SSI Earned Income Exclusion | - $65.00 |
 | |
| Subtotal | |
| Divide by two | ÷ 2 |
| |
| Jennifer's Countable Earned Income | |
| |
| Maximum SSI Benefit | $1,182.94 |
| Minus Total Countable Income | - |
| |
| Jennifer's SSI Benefit |
So, at the end of each month, Jennifer had the $500 she made at work and the $975.44 she got from SSI.
The Benefits Planner told Jennifer that Individual Development Accounts (IDAs) could help her save up for education, buying a home, or for starting a business. When she saved up some of her earnings, the IDA program would give her matching funds to help her reach her goal. She also learned that if she used a federally funded IDA, her IDA account wouldn’t count toward the SSI asset limit, and the earnings she set aside in the IDA would not be counted when figuring out her SSI benefits amount. In other words, she could keep making the same amount of money at work, but be allowed to save more than SSI’s asset limit, get matching money for free to help pay for her goal, and SSI would also give her more money. That sounded like it was a win-win-win for her!
Jennifer learned more about IDAs and decided that she wanted to go to school and get training that would help her get a job that paid more. Eventually, she found a federally funded IDA program that supported educational goals. So she signed up and began saving $40 per month of her earnings in her IDA. Her IDA program gave a 3:1 match, meaning that for every $40 she saved to pay her school’s tuition, the nonprofit would contribute $120 to her tuition. She thought this was a great deal!
Jennifer told the Social Security Administration (SSA) about her federally funded IDA program to make sure that they wouldn’t count the money she put into her IDA as income and that they wouldn’t count the IDA account as an asset. They noted her IDA in their records, excluded the account from the asset limit, and excluded the $40 per month she put into the IDA when figuring out Jennifer’s earnings. As a result, her SSI benefits amount actually went up by $20, even as she saved up money and got lots of matching funds for her tuition.
| Jennifer's Monthly Earned Income | $500.00 |
| Minus Jennifer's IDA Contribution | - $40.00 |
| Minus the $20 SSI General Income Exclusion | - $20.00 |
| Minus the $65 SSI Earned Income Exclusion | - $65.00 |
| |
| Subtotal | |
| Divide by two | ÷ 2 |
| |
| Jennifer's Countable Earned Income | |
| |
| Maximum SSI Benefit | $1,182.94 |
| Minus Total Countable Income | - |
| |
| Jennifer's SSI Benefit (With IDA) |
Each month Jennifer set aside $40 of her earnings in her IDA account. For her monthly expenses, she had $460 left from what she made at work and $995.44 she got from SSI. The $40 she had saved in her IDA would become available to her when it was time for her to pay for her educational expenses. At that point, the IDA program would chip in an additional $120.
By the time she had finished her IDA program a year later, she had saved up $480 of her own money for her school’s tuition and the IDA program also paid $1,440 for her tuition.
The bottom line: By contributing $40 to an IDA, her SSI benefits amount went up by $20 and the IDA program gave her an additional $120. That meant that each month, she actually had a total of an extra $140 thanks to doing the IDA program!
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Frequently Asked Questions
What is an Individual Development Account (IDA)?
An Individual Development Account, also known as an “IDA," is a savings account for low-income workers that can be used for small-business development, higher education, or the purchase of a first home. Each time you make a deposit, the IDA program contributes an additional deposit called a “match.” Most IDA programs have a match that is 1 to 4 times the size of your deposit. For example, if you are in an IDA program with a 2:1 match, each time you deposit $25, your program sets aside an additional $50.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Who is eligible for an Individual Development Account (IDA)?
Each IDA program is different and eligibility requirements vary from program to program. Generally, most have the following requirements:
-
Your annual income must be 200% of the Federal Poverty Level ($30,120 for an individual and $40,880 for a couple) or less.
- Exception: In some cases, you may qualify if your income is 65-85% of the median income in your area.
-
You must have earned income from a job.
- Exception: Some IDAs that are not funded by the federal government may have slightly different earned income requirements and allow for income from other sources.
- You must attend free financial literacy training. These classes usually cover topics such as money management, debt reduction, developing a savings plan, credit, and investing.
Some programs also have additional restrictions based on:
- Asset limits
- Your credit history
- Whether you are a citizen or legal resident. Ask about specific residency requirements when exploring IDA programs.
What if I lose my job while enrolled in an Individual Development Account (IDA)?
You must have earned income to enroll in an IDA. However, if you lose your job after enrolling, most IDAs will allow you a 6-month grace period. As long as you find a new job within 6 months, you’ll likely be able to keep your IDA.
How long can I keep my Individual Development Account (IDA) open?
Most people keep their IDAs open for 1 to 3 years, but some programs allow you to keep your account up to 5 years.
For what purposes can I use an Individual Development Account (IDA)?
Federally funded IDAs can be used for 3 purposes:
- Developing a business
- Investing in higher education, or
- Purchasing a first home.
IDA programs that are funded by other sources may allow you to save for other purposes like buying a car or computer. Check with the specific IDA program you wish to participate in for more details.
What will I be required to do once I’ve been accepted into an Individual Development Account (IDA) program?
Once accepted into an IDA program, you will be required to take financial education training. This training will give information on how to:
- Reduce your debt
- Develop a savings plan
- Prepare for your savings goal
- Research your credit history
- Choose banking options
- Invest
- Manage money
You may also take workshops related to your savings goal. Training may be in the form of one-on-one counseling, classroom training, peer support, or online training.
What is the process for participating in an Individual Development Account (IDA) program?
Once you’ve decided to participate in an IDA, you must take several steps:
- Figure out whether or not you want to pursue an IDA and what your goal is.
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Locate a program in your area. There are IDA program directories at the Prosperity Now and the Assets for Independence Resource Center.
- Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
- Attend an orientation meeting to find out about the program and verify your eligibility.
- Once accepted into the program, open a savings account at a bank or credit union that is tied to the IDA organization.
- Regularly deposit money into the account.
- When you have reached your savings goal, start withdrawing money from the account to spend on your goal.
Are there any medical eligibility requirements to enroll in an Individual Development Account (IDA)?
No. Disability status is not required to participate in an IDA program
How do I locate an Individual Development Account (IDA) program?
There are IDA program directories at the Prosperity Now and the Assets for Independence Resource Center. Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Can I qualify for an Individual Development Account (IDA) while getting Supplemental Security Income (SSI) benefits?
If you get SSI, then you should make sure to enroll in a federally funded IDA program. If you enroll in an IDA program that is funded by some other source, you could lose your SSI eligibility because of its asset limit.
Can I participate in a Plan to Achieve Self-Support (PASS) and an Individual Development Account (IDA) at the same time?
Yes. An IDA can be a part of your PASS; the only requirement is that your goal be the same for each program. One of the benefits of using the two together is that it allows you to set up a nonfederally funded IDA without jeopardizing your SSI benefits. As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI for eligibility.
If I’m getting Supplemental Security Income (SSI), do I need to tell Social Security about my Individual Development Account (IDA)?
Yes. You should ask your IDA caseworker to write a letter stating that you can participate in the IDA program without losing your SSI benefits. The letter should specifically mention the “Exclusions under Other Federal Statutes” clause. You should take the letter to Social Security for documentation and keep a copy of the letter for yourself.
Can I do an Individual Development Account (IDA) program at the same time as I get Social Security Disability Insurance (SSDI)?
Yes. There is no asset limit for SSDI recipients, so your IDA savings program will not impact your SSDI benefits. Therefore, SSDI beneficiaries can use either a federal or nonfederal IDA without affecting their SSDI benefits.
How do I stay enrolled in an Individual Development Account (IDA) program?
Each IDA program has different requirements for staying in the program. Generally, participants must attend an orientation, complete financial education training, keep in contact with their caseworkers, and complete their savings goals. As long as you do these and follow your savings plan, you should stay enrolled.
Is there a limit to how much I can save in my Individual Development Account (IDA)?
Yes. Most IDA programs only allow you to save a certain amount of money in your account — usually around $4,000. This includes the money you deposit as well as the matching funds. Once you reach the limit, you can deposit more money, but only the goal amount will be matched.
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Frequent Pitfalls
Participating in an Individual Development Account (IDA) program that affects your benefits
If you are getting Supplemental Security Income (SSI) and plan to enroll in an IDA, it is very important that you find out who funds that IDA program.
If you are on SSI, it is highly recommended that you enroll in a federally funded IDA rather than an IDA funded by some other source.
If you choose an IDA program that is not federally funded, you may become ineligible for your SSI benefits because your IDA account could cause you to exceed the asset limit. The only way you can have a nonfederally funded IDA that does not impact your SSI eligibility is if your IDA is part of your approved Plan to Achieve Self-Support (PASS).
The two federal programs that fund IDAs are Temporary Assistance for Needy Families (TANF) and the Assets for Independence Act (AFIA). However, you do not need to be enrolled in those programs to have an IDA funded by them.
Failing to fulfill Individual Development Account (IDA) program requirements
If you do not fulfill the requirements of the IDA program, you may become ineligible to access the matching funds offered by the program. Be sure to review the requirements of your program carefully with your IDA caseworker.
You must have earned income to start an Individual Development Account (IDA) program
To open a federally funded IDA account, your earned income must come from work. IDAs funded by other sources may allow for income from other sources.
Most Individual Development Account (IDA) programs have a savings limit (or savings cap)
Most programs only allow you to save a total of $4,000 to $6,000 in your IDA. This savings limit is called the savings cap. The savings cap includes the money you deposit as well as the matching funds from the IDA program.
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Resources
Learn More About Individual Development Accounts (IDAs)
Prosperity Now offers resources and information on IDAs, including a national directory of IDA programs.
The Assets for Independence Resource Center also has a national directory of IDA programs.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Getting Help with Your Benefits
If you get Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), or Childhood Disability Benefits (CDB), and you're looking for a job, a trained Benefits Planner can help you avoid problems with your job plan. If you need help or have questions about your situation, you can call the Ticket to Work Help Line at 1-866-968-7842 or 1-866-833-2967 (TTY), Monday through Friday.
View DB101's full list of experts who can help you understand different benefits.
Community-Based Organizations
Various community-based organizations guide people through state, federal, public, and private health and income programs. Some organizations may work with specific populations while others work with people with any type of disability. Here are a few examples
Goodwill Industries services range from personal evaluation and office skills training to career counseling, childcare, and transportation. Some Goodwill Industries centers also do benefits planning for people who get SSI, SSDI, and Medicare. Find locations at www.Goodwill.org, or by calling (voice) 1-800-466-3945.
The California Foundation for Independent Living Centers lists centers serving people with all disabilities. Many of these centers do benefits planning for people who get SSI, SSDI, and Medicare. If they don't offer benefits planning themselves, Independent Living Centers can refer you to local benefits planners. Find the list of independent living centers at www.CFILC.org, or by calling (voice) 1-916-325-1690 or (TTY) 1-916-325-1695.
The California Department of Public Health's Office of AIDS lists 1,300 organizations offering HIV/AIDS services throughout California. Some of these organizations provide case management, benefits planning, and benefits counseling services that can include help with public and private benefits programs. You can search the list online, or call (voice) 1-800-367-AIDS (2437) or (TTY) 1-888-225-AIDS (2437).
Disability Rights California provides representation for consumers of public programs who are disabled. Website publications include topics on health care, benefit programs, and In-Home Supportive Services.