Though it is possible to make a withdrawal 401k, it will however affect your overall unemployment benefit. Your unemployment benefits will be assessed alongside the amount that you withdraw from your 401k plan. This includes whatever you have already contributed to the plan, even though, in effect, it is money that has already been earned, and money that has further already been contributed by your employer. Once this has been assessed, all payments towards you unemployment benefit will cease to be paid. However, this stoppage is not permanent, for instance, if you cash out the total amount of your 401k plan which equates to say £2,000 and your weekly unemployment support s £350, the two amounts will be assessed and divided (2000/350 = 5.7), this sum, 5.7, equates to the amount of weeks your unemployment benefit will cease to be paid into your account.
This penalty is incurred because any form of cashing out of a plan such as 401k is regarded as a type of income, which is the reason behind why whoever administrates your 401k plan will hold around 20% for specific federal taxes. Owing to this fact, it is then up to you to pay these state taxes during the annual taxation period. So, even though you unemployment benefits will be affected if you do decide to cash in your 401k plan, you will however not be made liable for any payment towards your income tax if this should fall within your period of unemployment, that may be incremented on any form of income that has been earned during that tax year, which of course includes monetary assets that have been extracted from your 402k plan. A similar system further applies to the assets earned by individuals that fall into the bracket of student.
My husband receives 390.00 a week in Indiana for unemployment benefits and we want to cash in 401 for 16,000.00 Will his unemployment benefits be stopped for this?
Yes it will effect your unemployment. They will take the GROSS amount that you are cashing out ( including what you contributed, even though it is money you already earned, and what your employer contributed) and stop your payments. For example, if you cash out your 401K and the gross amount is $2,000, the check you receive is $1600, if you receive a weekly check (before taxes) from unemployment for $350, they take the Gross amount of the 401K divided by $350 (2000 / 350 = 5.7) and get the total number of payments they would have paid you, 5.7, and stop your unemployment benefits for 5.7 weeks. The unemployment office told me it doesn't effect it (just some rep) and I cashed mine out only to find out this.
I live in Massachusetts and this is my question, If you are receiving unemployment benefits and you need to withdraw money from your 401k because of financial problems is this going to affect unemployment benefits?
In Ohio I spoke with the Unemployment office after my layoff. They told me if I touched a penny of my 401k in a cash out, then I'd have to wait a whole YEAR for my unemployment benefits to begin. That scared me off cashing in the 401k. But now that I just found a job (7 months later) and am barely hanging on to my home, I wonder if I should try to cash it in and start it all over. Of course this is NOT my first choice, but I didn't choose to be laid off and have to accept a job now paying 50% of my previous one.
MY husband just got laid off and was told it was undetermined if he would be called back. This practice is so double standard, because it allows the employer to say my husband is an employee. We were told that he could not cash in his 401k because he's still considered an employee. However, hes forced to collect UNEMPLOYMENT because he has no job.
We want to know if we can cash in our 401K without it affecting his unemployment? We can not survive on my pay and his unemployment without it dragging us into financial ruin. We are desperate for an answer.
Madness in Michigan
I took a hardship loan on my 401k aprox $11k , bi-weekly payments were taken out of my payroll check, when I got laid-off I did not have the means to pay the balance of the loan back to so
they paid the loan back and showed it as a dispursement and taxed me on the 11k. How can and will this effect unemployment? CA-
The only thing that affects your unemployment benefits is a job,so no your 401K withdrawal will not affect your unemployment.....good luck
I live in denver co, my question is ,if I close out my 401k to pay off bills can I collect unemployment benefits. I was layed off I am 59.5 years old.
I was reading on Michigan's unemployment web sight that a 401k could only be counted in stopping my unemployment if less than 50 percent was paid in by me. If more than 50 percent was paid in by me than it wouldn't affect it. We'll see.
Cashing out a 401k is considered income, this is why whomever administers your 401k will hold 20% or so for federal taxes, and then it's up to you to pay your state taxes come time tax season. However, if you're unemployed you shouldn't be liable if you cashed the 401k out during a period of unemployment to pay the income tax on that earned income (cashing out of the 401k). If you are a student, I would imagine the life time learning credit or hope credits would cover any applicable federal/ state taxes assessed on the income your receive from cashing out your 401k.
It should not because that is not one of the questions asked when you sign up for unemployment they know everything about you, I think the questions are to see how truthful you are going to be I see no reason why your 401K withdrawal would make a difference you are still unemployed, you will have to file the withdrawal on your income taxes....hope this helps
A 401K is considered deferred pay and does affect unemployment
We live in the state of illinois. My husband is laid off and we have to pay state taxes this year. Can we be on a payment plan or do we have to submit all money owed by the due date