Will withdrawing $25K from my 401K affect my PA UC benefits?

same thing happened to my cousin last year he took out like 20k and then they stopped his benefits for like 3 weeks while they investigated it was a whole thing

401k withdrawals are generally NOT considered earned income for PA UC purposes. The key distinction is that unemployment benefits are designed to replace lost wages/earned income, and 401k withdrawals aren't wages - they're considered retirement distributions. However, you DO need to report any actual work or wages when filing weekly claims. That said, if you're under 59½, you'll likely face a 10% early withdrawal penalty plus income taxes on that $25k, which could be quite significant. Have you looked into a 401k loan instead? That wouldn't count as income at all.

I went through something similar when I had to make a hardship withdrawal from my retirement account while on unemployment. Let me tell you, dealing with PA UC's phone system was ABSOLUTE HELL trying to get clarification. Busy signals for DAYS, then getting disconnected after waiting an hour. I finally used Claimyr (claimyr.com) and got through to an agent in about 20 minutes. They have a video demo showing how it works here: https://youtu.be/CEPETxZdo9E?si=WL1ZzVZWG3KiHrg2 The agent confirmed that 401k withdrawals themselves don't count as "wages" but advised me to include a note explaining the deposit when it hits my bank account just to avoid any confusion. Better safe than sorry!

The confusion here is understandable! The PA UC system distinguishes between INCOME SOURCES that affect your eligibility. Here's what you need to know: 1. Wages from work = must report, will affect benefits 2. 401k withdrawals = not wages, doesn't affect eligibility 3. 401k loans = not income at all, no impact HOWEVER! The system can flag large deposits to your bank account if they do random audits or if you're on direct deposit. This triggers investigations which can temporarily freeze benefits while they sort it out. This is probably what happened to the person's cousin mentioned above. Best practice: Keep documentation proving the source of funds is a 401k withdrawal in case you need to explain a large deposit.

random question but kinda related - does anyone know if selling personal items like furniture counts against UC? i sold my dining table last month for $600 cash and now im paranoid

Just to put this issue to bed completely - I checked the PA UC Handbook (updated for 2025) and it specifically states on page 14: "Retirement distributions including 401k withdrawals are not considered disqualifying income unless they are regular pension payments." A one-time withdrawal to purchase a vehicle wouldn't affect your benefits. The confusion happens because the weekly certification asks if you received "income from any source" - technically you should answer "No" to this question since they're specifically asking about income types that would affect UC eligibility (wages, vacation pay, etc). If you want to be 100% in the clear, call and speak with a UC representative before making the withdrawal.

bro just take the money and dont tell them lol how would they even know unless ur getting direct deposit to the same account

Just wanted to follow up and say thanks to everyone who chimed in with advice! After reading through all the responses, I decided to go with the 401k loan option instead of a withdrawal. My plan administrator confirmed I can borrow up to $25k at a pretty reasonable interest rate, and since I'm paying myself back, it won't trigger any tax penalties or potential UC complications. Plus no risk of temporary benefit suspensions while they investigate large deposits. Really appreciate this community for helping me think through all the angles!

This is such a helpful thread! I'm facing a similar situation where I need about $15k for some urgent home repairs while on UC. Reading through everyone's experiences, it sounds like the 401k loan is definitely the way to go - no tax penalties, no risk of UC complications, and you're essentially borrowing from yourself. @Adrian Hughes thanks for the follow-up, it's really helpful to hear how you resolved it. Did your plan administrator have any specific requirements for the loan approval process?

Great question and really appreciate everyone sharing their experiences here! I went through something similar about 6 months ago when I needed emergency funds while on PA UC. After doing a ton of research and talking to my 401k administrator, I learned that the loan option is definitely the way to go if your plan allows it. One thing I'd add that hasn't been mentioned - make sure to check if your 401k plan has any restrictions on loans while you're unemployed. Some plans require you to be actively employed to take out a loan, though many have hardship exceptions. Also, if you do go the loan route, keep in mind that if you can't make the payments for any reason, the outstanding balance gets treated as a withdrawal and you'd face those tax penalties everyone mentioned. The withdrawal vs loan decision really comes down to your confidence in being able to make the loan payments even while job searching. For me, the loan worked out great because I found employment before any payment issues came up. Hope this helps with your decision!

Just want to add another perspective from someone who's been through the PA UC system multiple times over the years. The key thing everyone's touched on is documentation - keep EVERYTHING. I've seen too many people get caught up in investigations simply because they couldn't prove the source of large deposits. One thing I'd recommend is calling your 401k administrator first before making any decisions. Some plans have really flexible hardship withdrawal options that might have fewer penalties than a straight early withdrawal, and others have loan terms that work well for people between jobs. Every plan is different. Also, if you do end up needing to contact PA UC about anything related to this, try calling right when they open - I've had better luck getting through early in the morning. The hold times later in the day are brutal.

I've been following this thread and wanted to share my recent experience since it might help others. I was in a similar spot last month - needed about $18k for medical expenses while on PA UC. I initially panicked thinking any withdrawal would mess up my benefits, but after reading through PA's guidelines and talking to my 401k provider, I learned that hardship withdrawals for medical expenses actually have some special provisions that regular withdrawals don't. The key was documenting everything upfront - I kept copies of all medical bills, the hardship withdrawal application, and the approval letter from my 401k company. When the money hit my account, I proactively sent a message through the PA UC portal explaining the deposit with copies of the documentation attached. Never heard a peep from them about it. Still had to pay taxes and the 10% penalty since I'm under 59½, but it was way less stressful than I expected. The hardship withdrawal process took about 10 days total. Just wanted to put that option on people's radar since medical emergencies while unemployed are unfortunately pretty common.

Reading through this whole thread has been incredibly eye-opening! I'm currently on PA UC and was actually considering a 401k withdrawal for similar reasons - my car situation is getting pretty dire. Based on everyone's experiences here, it sounds like the loan route is definitely the safer bet if your plan allows it. One thing I'm curious about that hasn't been fully addressed - for those who went the loan route while unemployed, how did you handle the repayment logistics? Most plans I've seen require payroll deduction, but obviously that's not possible when you're on UC. Did you have to set up manual payments, and were there any fees associated with that? Also, @Ava Kim, your proactive approach of sending documentation through the UC portal is genius. I never would have thought to do that, but it makes total sense to get ahead of any potential questions rather than waiting for them to flag something. Thanks to everyone for sharing their experiences - this thread is going to save a lot of people from making costly mistakes!

This whole discussion has been incredibly helpful! I'm dealing with a similar situation where I need about $20k for some urgent expenses while on PA UC. Based on everyone's experiences here, it's clear that the 401k loan route is the way to go if possible - no tax penalties, no UC complications, and you're borrowing from yourself. What I'm taking away from this thread: 1) Always document everything, 2) Be proactive about communicating with UC if you do make any withdrawals, 3) Check with your 401k administrator about loan options and repayment flexibility while unemployed, and 4) Consider hardship withdrawal provisions if they apply to your situation. The collective wisdom here probably just saved me from making a costly mistake. Sometimes these community discussions are worth their weight in gold - thanks everyone for sharing your real-world experiences rather than just speculation!

This thread is pure gold! I've been on PA UC for about 2 months now and was literally googling this exact question yesterday about 401k withdrawals. My transmission just died and I need about $8k for a replacement vehicle to keep job searching effectively. Based on all the advice here, I'm definitely going to call my 401k administrator first thing Monday to ask about loan options. The loan route seems like a no-brainer - avoid the 10% penalty, no tax complications, and no risk of UC benefit suspensions during investigations. @Ava Kim your tip about proactively documenting everything through the UC portal is brilliant. Even if I go the loan route, I'll probably send them a heads up just to be completely transparent. Better safe than sorry! One quick question for anyone who's been through this - if you take a 401k loan while on UC and then find a job before it's paid off, does that create any issues with the transition back to employment? Just want to make sure I'm thinking through all the angles here. Thanks again everyone for sharing your real experiences - this community is incredibly helpful for navigating all these tricky situations!

This thread has been incredibly educational! I'm currently on PA UC and was actually considering a 401k withdrawal myself for some emergency home repairs. After reading through everyone's experiences, I'm definitely leaning toward the loan option now. One thing I wanted to add that might help others - I called my 401k administrator (Vanguard) yesterday just to get preliminary info, and they mentioned they have a specific "financial hardship" category for their loans that has slightly better terms than regular loans. Apparently unemployment qualifies as financial hardship, which can sometimes mean lower interest rates or more flexible repayment options. Also, for anyone worried about the phone wait times with PA UC that several people mentioned - I've had good luck using their online chat feature during off-peak hours (like early morning or late evening). Sometimes it's faster than trying to call. Thanks to everyone who shared their real experiences here. It's so much more helpful than trying to parse through official government websites that never seem to address the specific situations we're actually dealing with!

This entire thread has been a masterclass in navigating 401k withdrawals while on UC! I'm in a very similar situation - been on PA UC for about 6 weeks and my HVAC system just died (perfect timing, right?). Need about $12k for replacement and was panicking about how it might affect my benefits. After reading everyone's experiences, I'm convinced the 401k loan is the way to go. The tax implications alone make the withdrawal option pretty brutal - between the 10% early withdrawal penalty and regular income taxes, you're easily looking at losing 30-40% of what you take out. @Sophie Hernandez thanks for the tip about Vanguard's financial hardship category - my 401k is also with them so I'll definitely ask about that when I call Monday. @Ava Kim your proactive documentation approach is genius, and @Jessica Suarez your info about the manual payment setup process is super helpful. One thing I'm curious about - has anyone dealt with 401k loans from smaller employers or regional plan administrators? I'm wondering if the flexibility around unemployment situations varies significantly between the big companies like Fidelity/Vanguard versus smaller providers. This community is amazing - probably just saved me thousands in penalties and weeks of UC headaches!

Just wanted to chime in as someone who went through this exact situation about 8 months ago! I was on PA UC and needed about $15k for emergency dental work that couldn't wait. After doing tons of research (wish I had found this thread back then!), I ended up doing a 401k loan and it was absolutely the right choice. A few things I learned that might help others: 1. My plan administrator (TIAA) had a "personal financial hardship" loan category specifically for situations like unemployment - the interest rate was actually lower than their standard loan rate 2. They let me defer the first payment for 60 days, which gave me breathing room to figure out the manual payment setup 3. When I eventually found work 4 months later, transitioning back to payroll deduction was seamless The peace of mind was worth everything - no tax penalties, no UC complications, and I was essentially paying myself back. Plus having my health sorted out definitely helped during job interviews! One tip: if you're considering this route, ask your plan administrator about any "grace period" options for the first payment. Some plans offer this for hardship loans and it can really help with cash flow while you're getting everything set up.