Unemployment benefits and 401K (fit in, income, income tax)

[nursetobe86]

I have recently been approved to receive unemployment benefits. Since my bills were pilling up I decided to withdraw my 401K that I had with my previous employer (The employer that laid me off). Now I'm worried that my 401k money will affect my Unemployment benefits. I am in California. Can someone please help me out with this issue.

Thank you,

[marcopolo666]

This thread should be moved to the "employment/unemployment" area of this site.

But no, it won't have an effect on your unemployment benefits - it isn't earned income (from a job). Heck, if you sold $2 million of stock it wouldn't change anything about your unemployment payments.

On the other hand, you should look into whether or not you will be subject to penalties for cashing out your 401(k) (if you are under 59 1/2 years old). There are exceptions for when you don't get penalized for it. If you don't fit into an exception case, expect to be hit with a penalty (10% federal, 2.5% CA) on TOP of any income taxes that may be due - what you pulled out is considered earned income for the year you withdrew it. I believe that you were fired you are not subject to the 10 percent federal penalty if you reach age 55 by the time the separation occurs.

If you got a check in your name, and have already cashed it - I'm pretty sure that you can't change it at this point.

Read this :
Topic Number 558 - Additional Tax on Early Distributions from Retirement Plans Other Than IRAs
https://www.irs.gov/taxtopics/tc558

[settled00]

I disagree, this post should be here because many times local laws and situations and conditions differ from other regions/states.

As for answering the OP, no, you paid into the unemployment fund, therefore you are entitled to it.

...at least until Jerry Brown decides to cut or take some more for his brag-pot surplus.

[marcopolo666]

He did NOT pay into "the unemployment fund" - that's not how unemployment is financed.

[marcopolo666]

Originally Posted by settled00

I disagree, this post should be here because many times local laws and situations and conditions differ from other regions/states.

Of course they are different. That's why so many posts in the unemployment section list the state in the subject.

IF OP wants more info, s/he might try posting there.


//www.city-data.com/forum/unemployment/

PS: can a mod move this topic, please?