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Does a Withdrawal from an IRA Affect Unemployment Benefits

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  • 04-03-2018, 12:12 PM
    pinogrigio
    Does a Withdrawal from an IRA Affect Unemployment Benefits
    My question involves labor and employment law for the state of: NewJersey I currently have have a 401k with previous employer that was employer matched. I was laid off and scheduled to collect unemployment. I want to roll over 401k into an IRA. If I withdraw on the IRA will my UE benefits be reduced? Appreciate any help. Thanks
  • 04-03-2018, 12:24 PM
    PayrolGuy
    Re: Withdraw from IRA
    No but there will be a penalty for the withdrawal. Tax penalty that is.
  • 04-03-2018, 02:16 PM
    pinogrigio
    Re: Withdraw from IRA
    Can I withdraw from IRA for a hardship such as paying for Cobra. Thanks.
  • 04-03-2018, 02:29 PM
    chyvan
    Re: Withdraw from IRA
    Quote:

    Quoting pinogrigio
    View Post
    Can I withdraw from IRA for a hardship such as paying for Cobra. Thanks.

    If you're that broke, then apply for Medicaid. It's based on your income right now (zero or close to it) until your UI kicks in. NJ expanded the program. COBRA is usually way too expensive.
  • 04-03-2018, 02:46 PM
    pinogrigio
    Re: Withdraw from IRA
    We don’t qualify.

    I carried the health insurance thru my job as my husband works for a small business. We had to take the Cobra for the first month being April 1st as he is being treated for a medical condition and will most likely do for the second month wihile I explore options in the insurance marketplace. Agreed, it is expensive. I just want to make sure that when I go to roll over 401k into IRA and maybe need to withdraw on it that my UI in not affected. Any ideas?
  • 04-03-2018, 03:15 PM
    PayrolGuy
    Re: Withdraw from IRA
    Your UI will not be affected it is not needs based in any state in the country. If you and your termination qualifies you you could have $1billion and it wouldn't be affected.
  • 04-03-2018, 03:21 PM
    chyvan
    Re: Withdraw from IRA
    Quote:

    Quoting pinogrigio
    View Post
    roll over 401k into IRA and maybe need to withdraw on it that my UI in not affected.

    This has already been established.

    However, if you're not 59-1/2, I don't know whether you can use your IRA to pay for certain things and avoid the 10% tax (not UI) penalty.

    Personally, I'd get a good zero percent on purchases or balance transfer card and CHARGE everything that I could to avoid taking out my retirement and paying a penalty. It's BS that when you're down, you get kicked (the penalty), but those are the rules. I don't know if you can make COBRA payments with a credit card, but if you can't, then you can charge your groceries, utilities, gas, and whatnot to preserve your cash to make the COBRA payments. Then clean up the mess later when your situation improves, and if it doesn't, you can kiss the debt goodbye in a bankruptcy. Retirement money has protections in a bankruptcy, but cash in a bank account, not so much. Then if worse comes to worse, you'll still have your retirement money to try to jump start your life. When you really think it about it, the retirement money should be the LAST resort, not the first.
  • 04-03-2018, 03:21 PM
    pinogrigio
    Re: Withdraw from IRA
    From what I understand receiving lump sum 401k payout is considered pension in New Jersey and affects unemployment.What does needs based refer to? This is all foreign to me. I’ve never been without a job so I’m still in a bit of shock. Thanks.
  • 04-03-2018, 03:23 PM
    PayrolGuy
    Re: Withdraw from IRA
    But you aren't getting a lump sum 401K pay out. You are rolling the money into an IRA.
  • 04-03-2018, 03:28 PM
    cbg
    Re: Withdraw from IRA
    Needs based = eligibility is based on need.

    Unemployment is NOT needs based. You can qualify for unemployment if you won the lottery the week before, and you can fail to qualify if your next move is a relocation to a cardboard box at the corner of Third and Maple. It doesn't matter if you need the UI or not; you get it if you need the qualifications and you don't get it if you don't

    If you roll over your 401(k) into another qualified plan of any kind, it will not affect your unemployment. Period. i don't know how to make it any more clear than that.

    If you cash it out, you will pay a penalty AND you will pay taxes at the end of the year, unless you are at least 59 1/2.
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