Does cashing out 401k affect NYS Department of Labor unemployment benefits?
I'm currently receiving unemployment benefits and going through some financial hardship. I'm considering cashing out part of my 401k (around $8,000) to cover some urgent expenses. Will this affect my weekly unemployment claims with NYS Department of Labor? Do I need to report this as income when I file my weekly claim? I'm worried this might disqualify me or reduce my benefit amount. Has anyone dealt with this situation before?
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Natalie Khan
401k withdrawals are NOT considered wages or employment income for unemployment purposes. You don't need to report it on your weekly claim certification. However, you should be aware that early 401k withdrawals come with tax penalties and will be taxable income for your annual tax return. The NYS Department of Labor only cares about wages from work, not retirement account withdrawals.
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Rudy Cenizo
•Thank you! That's a huge relief. I was panicking thinking it would mess up my claim status.
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Daryl Bright
yea i had to cash out some of mine last year during my unemployment and it didnt affect anything with my benefits. just make sure you save money for taxes because they dont withhold enough usually
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Sienna Gomez
The key distinction is between earned income and unearned income. NYS Department of Labor unemployment benefits are only affected by wages from work or self-employment. 401k distributions, savings withdrawals, tax refunds, lottery winnings, etc. are all unearned income and don't impact your weekly benefit amount. Just don't confuse this with pension payments from a former employer - those ARE reportable income.
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Kirsuktow DarkBlade
•Wait, pension payments are different? My dad gets a small pension and unemployment, should he be reporting that?
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Sienna Gomez
•Yes, pension payments from a former employer where you worked and earned the pension ARE reportable and may reduce benefits. But 401k withdrawals are your own money, so they're treated differently.
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Abigail bergen
I've been trying to get through to NYS Department of Labor for weeks to ask this exact question! Their phone lines are always busy and I keep getting hung up on. It's so frustrating when you just need a simple answer about reporting requirements.
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Ahooker-Equator
•I had the same problem until I found this service called Claimyr at claimyr.com. They actually get you through to real NYS Department of Labor agents on the phone. There's a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. I was skeptical at first but it really helped me get answers about my specific claim issues without waiting on hold for hours.
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Anderson Prospero
Just want to add that while 401k withdrawals don't affect your UI benefits, you should really consider if this is the best option. The penalties and taxes can be brutal, plus you're losing years of compound growth. Maybe look into hardship loans from your 401k first?
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Rudy Cenizo
•I appreciate the advice, but I've already explored other options. This is really my last resort to avoid losing my apartment.
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