Will withdrawing from 401k or IRA affect my EDD unemployment benefits?

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.

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

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.

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!!

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!!

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.

quick question - does anyone know if this applies to ROTH IRAs too? since you already paid tax on that money...

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!

kinda random but have u tried applying for calfresh? might help with food costs while ur on unemployment

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.

Another option to consider is taking a loan from your 401k instead of a withdrawal, if your plan allows it. With a 401k loan, you're borrowing from yourself and paying yourself back with interest, but it typically doesn't count as income for EDD purposes since it's technically a loan, not a distribution. You usually have 5 years to pay it back through payroll deductions once you're working again. The downside is if you can't pay it back, it becomes a taxable distribution. But it might be worth checking with your 401k administrator to see if this is an option for your situation. Just make sure to verify with EDD that loans are treated differently than withdrawals before going this route.

Just wanted to add that if you do end up needing to withdraw from retirement accounts, consider spreading it across multiple weeks if possible. For example, instead of taking out $1000 all at once, you could take out $400 one week and $600 the next week. This way you might stay under the disqualification threshold for both weeks and still receive partial benefits, rather than getting $0 for one week. Also, keep in mind that early withdrawal penalties from retirement accounts (if you're under 59.5) are separate from the EDD income reporting - you'll still owe those penalties to the IRS even though you have to report the withdrawal as income to EDD. The timing and amount really matter here, so definitely worth planning it out carefully.

Just want to echo what others have said about being really careful with reporting. I made the mistake of not reporting a small 401k withdrawal ($800) when I was on unemployment thinking it wouldn't matter since it was "my money." EDD caught it through their cross-matching system with the IRS and I ended up having to pay back benefits plus a penalty. The overpayment notice came like 8 months later - way after I thought everything was settled. Even though it was stressful at the time, I'm glad I learned to always report everything exactly when and how you're supposed to. Better to lose some benefits upfront than deal with the headache of overpayments and penalties later. The system really is set up to catch these things eventually.

I went through something similar last year and want to share a few things that really helped me avoid touching my retirement accounts. First, check if your county has emergency rental assistance programs - many still have COVID relief funds available that can cover back rent and utilities. Second, contact your utility companies directly about hardship programs - most have payment plans or temporary assistance that can give you breathing room. Third, if you have any credit cards with available balance transfer offers, sometimes you can do a cash advance at a lower rate than the 10% early withdrawal penalty on retirement accounts. I also found that many churches and community organizations offer one-time emergency assistance even if you're not a member. The Salvation Army helped me with a utility bill when I was in a similar spot. Sometimes combining several smaller assistance sources is better than one big retirement withdrawal that could mess up multiple weeks of benefits. Hope this helps!

One thing to also consider is hardship withdrawals vs regular withdrawals from your 401k - some plans allow hardship withdrawals for unemployment situations that might have different tax implications, though they still count as income for EDD purposes. Also, if you haven't already, check if you qualify for the maximum unemployment benefit period extensions that might still be available in your situation. I was able to get an additional 13 weeks when I thought my benefits were running out. The key is really exploring every other option first - food banks, 211 services, utility assistance, even asking family/friends for temporary help - before touching retirement money. Those accounts are so hard to build back up, especially when you're unemployed. The fees and lost growth potential can really hurt your long-term financial security. Hang in there, this tough period will pass!

I've been following this thread and there's so much great advice here! I went through a similar situation about 6 months ago and wanted to add one more thing that really saved me - check if your state has a "Keep Your Home California" program or similar mortgage/rent assistance that's still running. I was able to get 3 months of rent covered which bought me time to avoid touching my retirement accounts at all. Also, if you have any old employer stock purchase plans or small investment accounts, those might be better to liquidate first since they won't have the same early withdrawal penalties as retirement accounts. The key thing I learned is that EDD really does catch everything eventually - they cross-reference with IRS data, so there's no hiding any income. But with all the resources people have mentioned here (CalFresh, 211, utility assistance, food banks, 401k loans instead of withdrawals), you might be able to avoid retirement withdrawals entirely. It took me about 2 weeks to get through all the applications but I was able to piece together enough assistance to make it work. Don't give up - there are more safety nets available than most people realize!

I just want to say this thread has been incredibly helpful! I'm in a similar situation - lost my job in tech about 6 weeks ago and my savings are running thin. I was also considering a 401k withdrawal but after reading everyone's experiences and advice, I'm definitely going to explore all the other options first. The idea about 401k loans instead of withdrawals is something I never considered, and all the resources people mentioned (CalFresh, 211, utility assistance programs) give me a much better roadmap. It's reassuring to know that others have made it through similar situations without touching their retirement accounts. Emma, I hope you're able to find the help you need through these programs - sounds like you have a solid plan now. Thanks to everyone who shared their knowledge and experiences here, this community is really valuable for people navigating the unemployment system!

This thread has been such a goldmine of information! As someone who works in financial planning, I want to emphasize a few key points that have been touched on but are worth highlighting. First, the 401k loan option that Ava mentioned is often the best choice if available - you're borrowing from yourself with no income reporting to EDD, and you pay yourself back with interest. Second, the strategy of spreading withdrawals across multiple weeks that Hannah suggested is brilliant for minimizing benefit loss. Third, please document everything - when you receive funds, amounts, and which certification week you report it for. EDD's systems can be glitchy and having your own records is crucial if there are ever discrepancies. Also, remember that if you do withdraw from retirement accounts, set aside money for taxes immediately - the 20% federal withholding often isn't enough to cover your full tax liability. The combination of lost compound growth, early withdrawal penalties, taxes, and reduced UI benefits makes retirement withdrawals very expensive money. The community resources everyone has shared (211, utility assistance, food banks, rent assistance) are definitely worth the time investment to apply. Hang in there Emma, and thanks everyone for sharing such helpful experiences!

Just wanted to add another resource that might help - check if your local community college has emergency aid programs for students or community members. Many colleges received federal emergency aid funding that they're still distributing, and some programs don't require you to be enrolled. Also, if you have any subscriptions or services you're paying for monthly (streaming, gym, etc.), contact them about hardship pauses - many companies will freeze accounts for 1-3 months without cancellation fees. I was able to pause my gym membership, internet upgrade, and two streaming services when I was unemployed, which saved about $80/month. Small amounts but every bit helps when you're trying to avoid touching retirement accounts. The other thing that really helped me was reaching out to my previous employer's HR department - some companies have employee assistance funds or can provide references for local resources they work with. Worth a quick call if you left on good terms!

One more resource that might help - if you have a car payment, contact your lender about forbearance or payment deferral options. Many auto lenders will allow you to skip 1-2 payments and add them to the end of your loan without any negative credit impact, especially if you explain you're temporarily unemployed. I used this option when I was on unemployment and it freed up $380/month for two months, which was huge for my budget. Also, don't forget to check if you qualify for reduced-rate utilities through programs like CARE (California Alternate Rates for Energy) if you're a PG&E customer, or similar programs with other utility companies. These programs can reduce your monthly bills by 20-35% and are often available to people receiving unemployment benefits. The applications are usually pretty quick online. Between car payment deferrals and reduced utility rates, you might be able to find enough monthly savings to avoid retirement withdrawals entirely!

Another angle to consider - if you're a homeowner, look into property tax postponement programs. California has a property tax postponement program for people facing financial hardship that can defer your property taxes until you're back on your feet. Also check with your mortgage lender about forbearance options - many still have COVID-era programs available or general hardship forbearance that can pause payments for 3-6 months. If you're a renter, some cities and counties have tenant protection programs that can help negotiate with landlords or provide mediation services if you're behind on rent. I was able to work out a payment plan with my landlord through my city's tenant services office when I was unemployed. The key is being proactive and reaching out before you're too far behind on payments. Most creditors and service providers are more willing to work with you if you contact them early rather than waiting until accounts are already delinquent.

I'm reading through this entire thread as someone who went through a very similar situation about a year ago, and I want to add one more perspective that might be helpful. After exploring many of the excellent resources everyone has mentioned here, I ended up using a combination approach that worked really well. I took a small 401k loan (about $2,000) which didn't affect my EDD benefits at all, then supplemented that with CalFresh, utility assistance through LIHEAP, and a one-time emergency grant from a local nonprofit. The 401k loan gave me immediate cash flow relief while I waited for the assistance programs to process (some took 2-3 weeks), and then I was able to pay the loan back faster once the other aid kicked in and reduced my monthly expenses. What really surprised me was how much help was actually available once I started looking - I ended up getting about $1,800 in various assistance over 3 months, which combined with the loan meant I never had to do a taxable withdrawal from my retirement accounts. The paperwork was a bit overwhelming at first, but I just tackled one application per day and kept a simple spreadsheet tracking what I'd applied for and the status. Emma, if you decide to go this route, I'd be happy to share the specific organizations and programs that helped me in California. Sometimes having a real example of how someone pieced it all together can make the process feel less daunting. Hang in there!