Will collecting EDD unemployment benefits affect my retirement income later?

ur neighbor is wrong lol. unemployment doesn't mess with social security at all. they're totally different systems. i was on EDD for like 8 months in 2022 and my projected retirement benefits didn't change at all when i checked my SS statement online.

Your question is a common concern, but I can give you some good news. Collecting unemployment insurance benefits from EDD will NOT negatively impact your future Social Security retirement benefits. These are completely separate systems with different funding sources. Some things to know: 1. Social Security retirement benefits are calculated based on your lifetime earnings that you paid SS taxes on 2. Unemployment benefits don't count as earnings for Social Security calculation purposes 3. The gap in your employment history from being unemployed might slightly affect your SS calculation (since you're not contributing during this period), but this effect is usually minimal unless you remain unemployed for many years 4. However, unemployment benefits ARE considered taxable income by the IRS, which is a different consideration If you're worried about your retirement planning during this period, you might want to speak with a financial advisor who specializes in retirement planning.

I JUST went through THIS with my dad!!! He was freaking out about the same thing and talked to someone at social security office and they said NOPE unemployment doesn't hurt your retirement AT ALL!!! Don't stress about it!!

My wife and I were both on unemployment during the pandemic and we had the exact same concern. We ended up comparing her Social Security statement from before and after, and there was barely any difference at all. I think if you're unemployed for like 10 years it might matter, but a few months or even a year isn't going to make a noticeable dent in your retirement calculations.

The problem isn't with Social Security - it's with your 401k or other retirement accounts! When you're unemployed, you're not contributing to those, and that CAN hurt your retirement if this goes on too long. My husband was on EDD last year and we calculated that missing 6 months of 401k contributions (with employer match) set us back almost $9,000 in retirement savings. Don't panic about Social Security, but do think about how to make up the retirement contributions you're missing while unemployed.

I had this same question when I was on EDD last year! I couldn't get through to anyone at Social Security on the phone. The EDD agents don't really know about this stuff either when I asked during my eligibility interview. I was on hold for HOURS trying to reach someone who could give me a straight answer.

Let me address a few retirement-related unemployment misconceptions: 1. Unemployment benefits DO NOT reduce Social Security retirement benefits. 2. Unemployment benefits ARE taxable income federally, though California doesn't tax them at the state level. 3. Brief periods of unemployment (months to a year) have minimal impact on your Social Security calculation, especially if you have a long work history. 4. You cannot contribute to a 401(k) while unemployed since those require earned income through an employer. 5. You CAN contribute to an IRA while unemployed IF you have other taxable income sources. The biggest retirement impact from unemployment usually comes from the temporary pause in retirement savings, not from any direct effect on future Social Security benefits.

I just want to add that while everyone is talking about Social Security, don't forget about Medicare eligibility! That's also based on your work credits, though most people easily qualify. Just something else to be aware of when thinking about your whole retirement picture.

btw i forgot to mention... make sure ur certifying correctly for ur weekly benefits and answering the questions right. if u mess up they can hit u with an overpayment and that WILL mess up ur finances now AND could impact ur retirement savings if u have to pay back a bunch of $$$ later

One other thing to consider - if you're close to retirement age (62+) and end up on unemployment for an extended period, you might want to evaluate whether taking early Social Security retirement might be more beneficial than remaining on unemployment. This is a complex financial decision that depends on your specific circumstances, but it's worth considering if you're struggling to find new employment as you get closer to retirement age.