Will my 401K withdrawal affect my TWC unemployment benefits after overpayment deduction?

Good news for your situation! According to the Texas Workforce Commission, will withdrawing my 401k affect my unemployment benefits in Texas? Generally no - if you took the money as a lump sum withdrawal, your unemployment benefits should not be impacted. TWC has specifically addressed this question, confirming that one-time 401k withdrawals don't affect benefits (https://x.com/TXWorkforce/status/1262428318504288264). Just be careful about how you withdraw the funds. While a one-time withdrawal is fine, setting up monthly withdrawals from your 401k could potentially impact your benefits. The difference matters in how TWC categorizes the income. You should still report the withdrawal when you request your payment, though. What happens if I don't report 401k withdrawal to unemployment? You could potentially end up with another overpayment situation, which you're already dealing with. Since you're specifically concerned about does 401k withdrawal affect unemployment benefits in Texas, the key thing to remember is that as long as it's not regular periodic payments, you should be okay. Keep in mind that while your unemployment isn't affected, you'll still have tax implications from the withdrawal itself, and possibly early withdrawal penalties depending on your age. But at least your weekly benefits should remain stable during this tough financial time.

same thing happened 2 me last month. i took out 5k from retirement and TWC never knew about it. still getting my payments no problem

I DID THIS LAST YEAR and it COMPLETELY messed up my benefits!!! TWC counted it as income for the weeks I received it and reduced my payment to ZERO for two payment periods. The system is RIGGED against us!!!! They take forever to pay us then punish us when we try to survive!

Your 401K withdrawal shouldn't affect your unemployment benefits. According to TWC rules, only earned income (like wages from working) needs to be reported during your biweekly payment requests. Retirement distributions aren't considered earned income for unemployment purposes. However, you WILL need to report this withdrawal on your taxes next year since it will be considered taxable income by the IRS, and there might be early withdrawal penalties depending on your age and situation.

when i was on unemployment last year i had so many problems with my claim and could never get through to TWC. busy signals for DAYS. my cousin told me about this service called Claimyr that got me connected to a TWC agent in like 20 minutes instead of spending hours redialing. check out their demo at https://youtu.be/V-IMvH88P1U?si=kNxmh025COIlIzKh - their website is claimyr.com. saved me so much frustration when i had questions about my claim that couldnt be answered online

I work in financial services (not with TWC) and wanted to clarify something important: your 401K withdrawal has tax implications but doesn't impact unemployment eligibility. However, if you withdrew from a 401K due to COVID hardship between 2020-2022, different rules applied during that period which might be causing some confusion in the responses you're seeing. For current 2025 withdrawals: 1. TWC doesn't count 401K distributions as earned income for benefit calculations 2. You'll owe income tax on the withdrawal amount 3. If you're under 59½, you'll likely face a 10% early withdrawal penalty 4. This withdrawal has no effect on your overpayment recoupment situation Your overpayment situation is completely separate - TWC will continue to recover that debt by reducing your current benefits until the overpayment is satisfied.

wait so they take money out of ur current benefits to pay for a mistake from 2020?? thats crazy how much are they taking?

Just to add to the good advice already shared - I called TWC about a similar situation last year. The representative confirmed that 401K withdrawals don't count as earned income for unemployment purposes. However, make sure you're prepared for tax season next year - depending on how much you withdrew, it could bump you into a higher tax bracket. Also, if the 401K withdrawal was substantial, it might affect other income-based benefits you receive (like SNAP or healthcare subsidies), even though it doesn't affect your unemployment benefits.

I'm confused...so we don't report 401k withdrawals on payment requests? What about severance pay? My company gave me severance when they laid me off last month but I haven't received the check yet. Do I report that?

I went through a similar situation with TWC overpayment deductions a few months ago - it's really stressful when you're already struggling financially. The good news is that your 401K withdrawal won't affect your unemployment benefits at all. TWC only considers "earned income" (wages from actual work) when calculating benefit reductions, not retirement distributions. However, I learned the hard way that you should still mention the withdrawal when you speak to a TWC representative if you call about anything else, just to be transparent. They won't reduce your benefits for it, but it shows you're being honest about your financial situation. One thing that helped me was setting up a small emergency fund from part of my 401K withdrawal specifically for the weeks when the overpayment deduction hits hardest. Since you know they're taking 25% each week, you can at least plan around that reduction. The overpayment will eventually be paid off and you'll get your full benefits back. Also, start setting aside a little money each week for the tax bill you'll get next year from the withdrawal - don't let it catch you by surprise like I did! But for now, your unemployment benefits should continue as normal despite the 401K withdrawal.

I'm so sorry you're dealing with this stress on top of an already difficult financial situation. I went through something similar last year and can share what I learned. Your 401K withdrawal will NOT affect your unemployment benefits. TWC specifically states that retirement distributions (including 401K withdrawals) are not considered "earned income" for unemployment purposes. Only wages from actual work count against your benefits. A few important things to keep in mind: - You don't need to report the 401K withdrawal on your biweekly payment request forms - The withdrawal is completely separate from your overpayment situation - TWC will continue deducting that 25% until it's paid off regardless - You will owe taxes on the withdrawal next year, plus likely a 10% early withdrawal penalty since you're under 59½ I know it's tempting to not mention it at all, but if you ever need to call TWC about other issues, it's better to be upfront about the withdrawal. They won't penalize your benefits for it, but transparency helps avoid any future complications. The overpayment deductions are rough, but at least you can count on getting that consistent $349 weekly while you get back on your feet. Hang in there - you're doing what you need to do to survive a tough situation.

I'm dealing with a very similar situation right now - overpayment deductions from a 2021 issue and just had to tap into my retirement savings to keep up with bills. The stress is real, but I can confirm what others have said about 401K withdrawals not affecting your unemployment benefits. When I called TWC about my overpayment situation a few weeks ago, I mentioned the 401K withdrawal to the representative just to be safe. She confirmed that retirement distributions don't count as earned income for unemployment purposes and don't need to be reported on payment requests. The key distinction is that TWC only cares about money you earn from working, not from your own retirement savings. One thing that's helped me budget during the overpayment deduction period is tracking exactly when it should be paid off. You can request an overpayment balance statement from TWC to see how much is left. At 25% deduction from each payment, you can calculate roughly how many more weeks you'll be dealing with the reduced payments. The 401K withdrawal definitely comes with tax consequences (I'm setting aside about 30% of what I withdrew for taxes and penalties), but at least it won't create any new problems with your unemployment claim. You're doing what you need to do to get through a tough time - don't feel bad about using your own money to survive.

I went through this exact situation about 6 months ago - 401K withdrawal while dealing with TWC overpayment deductions. The stress was overwhelming, but I can confirm what everyone else is saying: your 401K withdrawal will NOT affect your unemployment benefits at all. TWC has a clear distinction between "earned income" (wages from work) and retirement distributions. Your 401K withdrawal falls under retirement distributions, so it doesn't count against your weekly benefit amount. You don't report it on your payment request forms either. What really helped me was calling TWC directly and asking about both my overpayment timeline and mentioning the 401K withdrawal. The rep was actually really helpful and confirmed that the withdrawal wouldn't impact my benefits. She also helped me understand exactly how much longer the overpayment deductions would continue, which made budgeting so much easier. One practical tip: I used part of my 401K withdrawal to create a small buffer fund specifically for the weeks when bills are tight due to the reduced unemployment payments. Since you know you're getting $349 instead of $465, you can plan around that consistent amount. The tax implications are real though - definitely set aside about 30-35% of what you withdrew for taxes and penalties next year. But at least you can breathe easy knowing your unemployment benefits are secure. You're using your own money to survive a tough situation - there's nothing wrong with that.

I'm really sorry you're dealing with both the overpayment deductions and financial stress at the same time - that's such a difficult situation. The good news is that your 401K withdrawal won't impact your unemployment benefits at all! I went through something similar last year when I had to withdraw from my retirement account during a long job search. TWC treats 401K distributions completely differently from earned income - they only count wages from actual work against your benefits, not money from your own retirement savings. A few things that helped me get through it: - You don't need to report the withdrawal on your weekly payment request forms - Your $349 weekly payments will continue as normal (the overpayment deduction is separate) - Set aside about 30% of what you withdrew for taxes and the early withdrawal penalty next year - Consider using part of the withdrawal to create a small emergency buffer since you know exactly what your reduced weekly amount will be When I called TWC about other questions, I mentioned my withdrawal just to be transparent. The rep confirmed it wouldn't affect my benefits and actually appreciated that I was upfront about it. It might give you peace of mind to do the same when you call about your overpayment balance. You're doing what you need to do to survive a tough financial situation. Don't feel guilty about using your own money to get through this - that's exactly what emergency savings are for, even if it comes with tax consequences later.

I'm so glad you found this thread helpful! I went through almost the exact same situation about 8 months ago - overpayment deductions from a reporting error in 2020, plus had to withdraw from my 401K to cover an unexpected medical bill while my benefits were reduced. Just wanted to add one more practical tip that really saved me: when you call TWC to get your overpayment balance (definitely do this!), ask them to email you a written statement. Having that documentation helped me plan exactly when the deductions would end and also gave me peace of mind that everything was properly documented in their system. Also, since you mentioned rent going up this month - you might want to look into local emergency rental assistance programs while you're dealing with the reduced payments. Many are still available and don't count retirement withdrawals against income eligibility since they're not considered earned income. It could help bridge the gap during these tough months. Your transparency about the withdrawal is the right approach. TWC has actually been pretty understanding when people are upfront about using their own retirement funds to survive - it shows you're being responsible, not trying to game the system. You're going to get through this!

I just went through this exact situation two months ago and wanted to share my experience to hopefully ease your stress! I had to withdraw $12,000 from my 401K while dealing with TWC overpayment deductions, and I was terrified it would mess up my remaining benefits. The good news: your 401K withdrawal absolutely will NOT affect your unemployment benefits. TWC only counts "earned income" from actual work - retirement distributions are treated completely separately. I was so worried that I called TWC three times to confirm, and every representative told me the same thing. Here's what I learned: - Don't report the withdrawal on your weekly payment request forms - Your $349 weekly payments will continue exactly as they are now - The overpayment deduction timeline won't change at all - Be upfront about it if you call TWC about other issues - they actually appreciate the transparency The tax hit is real though - I ended up owing about $3,500 between income tax and the 10% early withdrawal penalty. Definitely set aside at least 30% of what you withdrew so you're not scrambling next tax season. One thing that really helped my peace of mind was getting a written statement of my remaining overpayment balance from TWC. Knowing exactly when those deductions would end made budgeting so much easier. You're doing what you need to do to survive - there's absolutely nothing wrong with using your own retirement money during a financial emergency. Hang in there!

I just wanted to add some reassurance as someone who works with unemployment claims - your 401K withdrawal will absolutely NOT affect your TWC benefits! I see this question come up a lot, and the confusion is understandable, but Texas Workforce Commission is very clear about this. The key thing to remember is that TWC only considers "earned income" when calculating benefit reductions. Your 401K withdrawal is classified as a retirement distribution, not earned income from work. This means: - You don't report it on your biweekly payment request forms - Your current $349 weekly payments will continue unchanged - The overpayment deduction schedule remains the same - It won't trigger any new investigations or issues with your claim I always recommend being transparent if you call TWC about other matters - just mention it casually and they'll confirm it doesn't affect your benefits. This actually builds trust and shows you're being honest about your financial situation. For the tax side: definitely set aside 30-35% of your withdrawal for next year. At your age, you'll face the 10% early withdrawal penalty plus regular income tax on the full amount. But that's a future problem - right now, your unemployment benefits are secure. You're making smart financial decisions during a tough time. Using your own retirement savings to stay afloat while dealing with overpayment deductions is exactly what these accounts are designed for in emergencies. Don't second-guess yourself!

I'm so sorry you're dealing with this stressful situation! I went through something very similar about a year ago - had to withdraw from my 401K while TWC was deducting money for an overpayment from 2019. The anxiety about potentially losing what little benefits I was getting was overwhelming. The great news is that your 401K withdrawal will NOT affect your unemployment benefits at all! TWC only counts earned income from actual work when determining benefit reductions. Retirement distributions are treated completely separately and don't need to be reported on your weekly payment requests. Here's what helped me get through it: - Your $349 weekly payments will continue exactly as they are now - The overpayment deduction timeline won't change - If you call TWC about anything else, just mention the withdrawal casually - they appreciate transparency and will confirm it doesn't affect benefits - Definitely set aside about 30% of your withdrawal for taxes and the early withdrawal penalty next year One thing I wish I'd done sooner was calling TWC to get a written statement of my remaining overpayment balance. Knowing exactly when those deductions would end made such a difference for my peace of mind and budgeting. You're doing exactly what you need to do to survive a really tough financial situation. Don't feel guilty about using your own retirement money during an emergency - that's exactly what it's there for. You're going to get through this!

I went through this exact situation about 6 months ago and wanted to share what I learned to help ease your stress. Your 401K withdrawal will absolutely NOT affect your unemployment benefits - I can say this with complete confidence because I called TWC multiple times to confirm. Here's what you need to know: - TWC only counts "earned income" from actual work against your benefits - 401K withdrawals are retirement distributions, not earned income - You don't report it on your weekly payment request forms - Your $349 weekly payments will continue exactly as they are - The overpayment deduction timeline stays the same What really helped me was being completely transparent when I called TWC about other issues. I mentioned my withdrawal upfront and the representative actually thanked me for being honest. They confirmed it wouldn't impact my benefits and it actually seemed to build trust in their system. Two practical suggestions: First, call TWC to get a written statement of your remaining overpayment balance so you know exactly when those deductions will end. Second, set aside about 30% of your $8,000 withdrawal right now for taxes and the 10% early withdrawal penalty you'll face next year. I know it feels awful having to touch retirement savings, but you're doing exactly what you need to do to survive a tough situation. This is literally what these accounts are designed for during financial emergencies. You're going to get through this - just focus on the fact that your unemployment benefits are secure and you have a plan to bridge the gap until the overpayment is cleared.

I'm so sorry you're going through this stressful situation - the combination of overpayment deductions and financial uncertainty is really tough to handle. But I have great news that should ease your worries: your 401K withdrawal will NOT affect your TWC unemployment benefits at all! I went through something very similar last year when I had overpayment deductions and needed to access my retirement savings. TWC has a clear policy that only "earned income" from actual work counts against your benefits. Your 401K withdrawal is classified as a retirement distribution, which is completely different and doesn't impact your unemployment payments. Here's what you can count on: - Your current $349 weekly payments will continue unchanged - You don't need to report the withdrawal on your payment request forms - The overpayment deduction timeline stays exactly the same - This won't trigger any new issues with your claim I'd recommend calling TWC to get a written statement of your remaining overpayment balance - it really helps with planning and peace of mind to know exactly when those deductions will end. When you call, feel free to mention your withdrawal casually. The representatives actually appreciate transparency and will confirm it doesn't affect your benefits. The one thing to prepare for is the tax impact next year - definitely set aside about 30% of that $8,000 for income taxes and the 10% early withdrawal penalty. But that's a future issue to handle, not something that affects your current benefits. You're making smart decisions to get through a difficult time. This is exactly what retirement accounts are designed for during genuine financial emergencies. Focus on the fact that your unemployment benefits are secure while you work through this temporary rough patch!

I'm so glad you found this community and got such detailed, helpful responses! I went through a nearly identical situation about 4 months ago - TWC overpayment deductions from a 2020 reporting error plus having to withdraw $6,500 from my 401K to cover urgent expenses while my benefits were reduced. The stress you're feeling is completely understandable, but everyone here has given you accurate information: your 401K withdrawal will NOT affect your unemployment benefits at all. TWC only considers earned income from actual work - retirement distributions are treated entirely separately. A few additional thoughts that might help: - Consider this withdrawal an investment in your financial stability during a temporary crisis - The written overpayment balance statement from TWC is gold - it transformed my anxiety into a concrete timeline I could plan around - Setting up automatic transfers of that 30% tax money to a separate account helps avoid the temptation to spend it What struck me most about your situation is how responsible you're being - you're using your own retirement savings as a last resort while dealing with reduced benefits through no fault of your own. That's exactly what these accounts are designed for, even with the tax penalties. The combination of knowing your $349 weekly payments are secure plus having a buffer from the withdrawal should give you breathing room to get through this tough period. You've got this, and this community is proof that people successfully navigate these exact challenges all the time!