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Old 10-30-2011, 07:27 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
Reputation: 15135

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Quote:
Originally Posted by rjm1cc View Post
However I do not see why you would not receive unemployment benefits. Lets say the whole 401k was income in the week you received it. The next week you received nothing from the 401k so you should get benefits. I would appeal the decision with the unemployment office.
Not every state views retirement withdrawals this way. Some do reduce the benefit until the retirement withdrawal equals total benefits that would have been paid. There is also, of course, a good possibility she might have received erroneous advice from the Indiana UE people. Happens a lot in every state.

In any event, OP has not returned to this thread. Too bad, good advice here. She should not passively accept this situation.
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Old 11-07-2011, 10:53 AM
 
Location: Indiana
4 posts, read 48,346 times
Reputation: 15
My husband signed up for Employment Benefits on Aug. 29 and has only received his benefits 4 times. We've had to spend all of his 401k benefits to pay bills, buy food and other necessities. When he filed his voucher yesterday afternoon it showed that his benefits are still on hold due to an unresolved issue. I am so sick of seeing this every week but I don't know what he can do about it.

He received an email from the Unemployment office saying it could take 30 days or longer to get this issue resolved.

If they match it dollar for dollar he won't receive any benefits for around 32 weeks.

Had he known he was going to have all of these problems with his 401 k he would have drawn it out before he got laid off.

He didn't know he wasn't allowed to spend the check and had he known that before he would have had it put into an IRA account.

This whole this is one big mess.

Thank all of you who replied.
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Old 11-07-2011, 11:12 AM
 
29,772 posts, read 34,856,103 times
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Quote:
Originally Posted by oddstray View Post
If that "Financial Advisor" is one that works under any sort of licensing board, I'd file a formal complaint with that board that you weren't advised that the thing to do with that money was to roll it over into an IRA. It won't solve your problem, but maybe it'll help someone down the line.
My exact question. What was the advisor thinking and were his guidelines followed.
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Old 11-07-2011, 11:15 AM
 
4,571 posts, read 7,055,913 times
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so sorry that you got such bad advice....no matter what age, you can roll your 401K over into an IRA (I think you have like 30 or 60 days, can't remember which). You should have been advised not to take a check because you would be taxed on the whole amount. If you really needed the money, you could have then made withdrawals as necessary (if he was 55 or over you can take withdrawals without penalty but it has to be a set amount for a certain amount of years...5 years I think). I went thru this when my company closed down. This should have been a smooth transaction but what's done now can't be undone, unfortunately. I don't get why you can't collect unemployment though. He is unemployed and I assume looking for a job. for example, if he was collecting SS and was let go from his job, he could still collect unemployment. I know people who have done that. I can related though because when my company went under, I got little to no advise on what to do and it was very stressful.
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Old 11-07-2011, 12:32 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
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Quote:
Originally Posted by loveautumn View Post
so sorry that you got such bad advice....no matter what age, you can roll your 401K over into an IRA (I think you have like 30 or 60 days, can't remember which). You should have been advised not to take a check because you would be taxed on the whole amount.
It is 60 days:
Quote:
Originally Posted by Ariadne22 View Post
You can mitigate some of this by immediately setting up an IRA and depositing the money into that as a rollover within 60 days of the withdrawal. At least then the whole lump sum might not be subject to income taxes and penalties - only the amount you withdraw as you need it.
Quote:
Originally Posted by loveautumn View Post
If you really needed the money, you could have then made withdrawals as necessary (if he was 55 or over you can take withdrawals without penalty but it has to be a set amount for a certain amount of years...5 years I think).
SEPP - substantially equal periodic payments can be set up for an IRA at any age and must be continued until age 59-1/2. Most 401ks do not allow this option, so the work-around in OP's case, again, would be a direct rollover into an IRA and then set up the SEPP. Setting up a SEPP avoids the 10% penalty.

Penalty free withdrawals from a 401k can begin the year in which retiree turns 55 and before he actually retires. If not begun at age 55 while working, once retired, he must use SEPP before age 59-1/2 to avoid the penalty.
Quote:
Originally Posted by loveautumn View Post
I don't get why you can't collect unemployment though. He is unemployed and I assume looking for a job.
This was explained upthread, here:
Quote:
Originally Posted by Ariadne22 View Post
The assumption by the unemployment offices is this is a partially-funded employer retirement plan, as most employers match some portion of the employee 401k contributions. In many states, withdrawals from employer funded retirement plans affect unemployment compensation benefits dollar for dollar.
Quote:
Originally Posted by loveautumn View Post
for example, if he was collecting SS and was let go from his job, he could still collect unemployment.
It is legal in all but one or two states to collect Social Security benefits AND unemployment benefits. SS is NOT considered an employer-funded retirement plan under unemployment compensation law in most states - although, in reality, the employer has paid 50% of the contributions.

Some states (Illinois, as an example) are considering amending their laws to offset UE benefits if one is collecting SS because this extended period of unemployment is bankrupting the states. For now, in 48 (I believe) states, it is legal to collect both SS and unemployment benefits without one affecting the other.

Last edited by Ariadne22; 11-07-2011 at 12:56 PM..
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Old 11-07-2011, 12:51 PM
 
4,571 posts, read 7,055,913 times
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thanks for the clarification....
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Old 11-07-2011, 01:20 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
Reputation: 15135
Quote:
Originally Posted by MidnightStar View Post
My husband signed up for Employment Benefits on Aug. 29 and has only received his benefits 4 times.

If they match it dollar for dollar he won't receive any benefits for around 32 weeks.
Since you have already been paid four weeks, it is too late to void the claim. However, you might ask if you could repay the four weeks' benefits, then have the claim voided, and file a new claim in 32 weeks. That way you would still collect 26 weeks' state benefits AND maintain eligibility for EUC extensions if they are renewed by Congress.
Quote:
Originally Posted by MidnightStar View Post
Had he known he was going to have all of these problems with his 401 k he would have drawn it out before he got laid off.

He didn't know he wasn't allowed to spend the check and had he known that before he would have had it put into an IRA account.
This is a cautionary note for anyone having an IRA, 401k, HSA, - any tax-sheltered account. Please, please, please educate yourself on the IRS guidelines and keep current as the law changes. Know the tax (and other) implications/pitfalls before you withdraw a penny from any of these accounts.

These plans are very advantageous financially for their participants - provided people inform themselves as to the laws governing these plans. This information is readily available everywhere - at Schwab, Fidelity, Vanguard, TRowePrice, IRS online.

Even when unemployment benefits are not part of the picture, the tax ramifications of lump sum withdrawals can be significant. A few simple preventive tweaks as to how those withdrawals are handled can save substantial dollars when most needed.
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Old 11-08-2011, 07:42 AM
 
Location: Indiana
4 posts, read 48,346 times
Reputation: 15
Both my husband and myself get SS and if that was the only income we had he would get Unemployment Benefits. He gets another pension from the state of Indiana. That pension isn't what has stopped him from drawing his Benefits......just the 401 k.

He's 73 years old has heart and blood pressure problems. He had a heart attack in March of 2007, had to have 4 stints put in, was off work for several weeks and after that he started working only 4 hours a day. When he went to the Unemployment Office to file his initial claim he didn't mention that. Probably wouldn't have made any difference anyway.

Sometimes I wonder if the people at the main Unemployment Office in Indianapolis aren't purposely giving him a hard time because of his age.
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Old 11-08-2011, 09:13 AM
 
Location: Northern panhandle WV
3,007 posts, read 2,169,240 times
Reputation: 6691
Under any scenario whatever amount your husband contributed to the 401K should not be considered in this dollar for dollar thing.
DID the company match any portion of the money your husband paid in? if so how much. Say over the time he was there he put in $5000 and they put in $2000 then at worst the State should only be looking at the $2000 as paid employment benefit. the other 5000 was his own money.

Now none of that helps with the taxes that will be due on this, Did the trustee of the 401K at least withold the 20% Taxes amount?

Also you really need to do better homework for yourself moving forward and get a better adviser.

Very sorry this happened to you. and good luck.
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Old 09-23-2014, 03:38 AM
 
1 posts, read 1,238 times
Reputation: 10
Default 401k and unemployment in WA

Quote:
Originally Posted by cdelena View Post
Maybe things are very different there but in every state I have been in there is no requirement to report 401k withdrawals to the unemployment office and certainly no reason explain what you used it for. It is your savings and does not change the unemployment situation or your claim to benefits.
This is wrong! In WA you must report withdrawals from your 401k. If you take a lump some They take the employers contribution and prorate it by your life expectancy... If you have $50,000 in your 401k at age 52 and your employer matched funds at 50% they will take the $25,000 and spread it out over 24 years ( there is a life expectancy chart for the Internal Revenue code that they use);
24 years x 52 weeks = 1248 weeks
$25,000 divided by 1248 = $20.03
So it will reduce your weekly benefit by $20.03

Last edited by Niceguy99301; 09-23-2014 at 03:40 AM.. Reason: insomnia and spelling mistakes
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