Will withdrawing from 401k or IRA affect my EDD unemployment benefits?
I'm in a really tight spot financially and considering taking money out of my retirement accounts. I lost my job at a manufacturing plant about 2 months ago and my unemployment benefits aren't covering all my expenses. I'm thinking about pulling some money from either my 401k or IRA to catch up on bills, but I'm worried it might mess up my EDD claim or reduce my weekly benefit amount. Does anyone know if retirement withdrawals count as income for unemployment purposes? Will EDD find out automatically or do I need to report it when I certify? Really don't want to lose my benefits over this.
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Katherine Hunter
Yes, withdrawals from retirement accounts DO count as income and need to be reported when you certify. The amount you withdraw could reduce your weekly benefit amount or potentially disqualify you for the week(s) you receive the money, depending on how much you take out. EDD considers it income for the week you receive it, not spread out over time.
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Emma Morales
AuthorThat's what I was afraid of... do you know if there's a certain amount I can withdraw without it affecting my benefits? Like is there a threshold?
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Lucas Parker
i took money from my 401k last year while on ui and it totally messed up my payment for that week. they reduced it by like the exact amount i took out. sucked but at least they didnt disqualify me completely
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Emma Morales
AuthorThanks for sharing your experience. Did they find out automatically or did you have to report it?
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Lucas Parker
i reported it on my certification. pretty sure they would find out anyway cuz its all reported to irs and stuff
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Donna Cline
Retirement withdrawals are considered income for UI purposes. When you certify, you must report the gross amount (before taxes/penalties) for the week you receive the funds. Here's how it works: 1. You can earn up to $25 or 25% of your weekly benefit amount (whichever is greater) without reduction 2. After that threshold, your benefit is reduced dollar-for-dollar 3. If your withdrawal exceeds your weekly benefit amount, you'll be disqualified for that week For example, if your WBA is $450 and you withdraw $1000, you can earn $112.50 without reduction (25% of $450), then your benefit would be reduced by $887.50, meaning you'd receive $0 for that week. Consider taking just enough to stay under the threshold or timing the withdrawal to minimize impact.
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Emma Morales
AuthorThank you so much for breaking this down! That's really helpful information. So it sounds like I could withdraw a small amount (around $112 in your example) without it affecting my benefits. If I really need more, I guess I should just plan for getting $0 that week.
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Harper Collins
my brother-in-law did this and EDD found out even tho he didnt report it! something about the IRS and EDD sharing info. he had to pay back benefits AND got hit with a false statement penalty. be super careful!!
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Kelsey Hawkins
The system is so unfair. We put OUR OWN MONEY into these retirement accounts and then when we need it most they PENALIZE us for using it!!! It's OUR MONEY not income!! I had the same issue last year and had to pay back benefits because I didn't know it counted as income. The whole EDD system is designed to trap people!!
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Donna Cline
While I understand the frustration, legally it is considered income when withdrawn. The contributions were tax-advantaged when deposited, so they become taxable when withdrawn. EDD follows IRS guidelines on what constitutes income. It's important to report accurately to avoid penalties.
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Dylan Fisher
Have you tried calling EDD directly to ask them? They can give you the most accurate info for your specific situation. I know it's nearly impossible to get through to them though. When I was having issues with my claim, I used a service called Claimyr (claimyr.com) that got me connected to an EDD rep really quickly. They have a video showing how it works: https://youtu.be/JmuwXR7HA10?si=TSwYbu_GOwYzt9km. The rep I spoke with was able to answer all my questions about income reporting and gave me specific advice for my situation.
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Emma Morales
AuthorI've been trying to call EDD for days with no luck. I'll check out that service - anything to get a straight answer from an actual EDD rep would be worth it at this point. Thanks!
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Edwards Hugo
quick question - does anyone know if this applies to ROTH IRAs too? since you already paid tax on that money...
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Donna Cline
Yes, it still applies to Roth IRA withdrawals for unemployment purposes, even though they're treated differently for tax purposes. EDD considers any money you receive during a week as income, regardless of the tax treatment. They don't distinguish between pre-tax and post-tax sources.
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Emma Morales
Thanks everyone for all the helpful information! After reading all your responses, I think I'm going to hold off on withdrawing from my retirement accounts for now. I'm going to try calling EDD first using that Claimyr service to confirm everything, and maybe just take out a small amount that stays under the threshold if absolutely necessary. Really appreciate all the advice!
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Katherine Hunter
Smart decision. If you do need to withdraw, remember to report it correctly when certifying and keep documentation of exactly when you received the funds so you can show which certification week it should apply to if there's ever a question.
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Harper Collins
kinda random but have u tried applying for calfresh? might help with food costs while ur on unemployment
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Emma Morales
AuthorThat's actually a good idea I hadn't thought of! I'll look into that too. Every little bit helps right now.
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Miguel Ramos
Also look into local food banks and community assistance programs in your area. Many don't have income requirements or the requirements are pretty flexible for unemployment situations. United Way (dial 211) can connect you with local resources for utilities, rent assistance, and food. Sometimes these resources can bridge the gap without having to touch your retirement savings at all. I used several programs when I was unemployed and it really helped stretch my benefits further.
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