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  1. #9
    Join Date
    Jan 2015
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    Default Re: Will Deposits to or Withdrawals from a 401K Affect Unemployment Eligibility

    Most certainly most states do not treat IRA's as retirement pensions when you do sign up for unemployment, particularly if you are not actively drawing them out. Only in the circumstance that the employee were laid off of out of work through no fault of their own, and then also receiving a pension would there be any decision related to unemployment and pensions of any kind.

    If you were let go, the calculation of unemployment benefits would be based upon your wages in the appropriate quarters and the reason you left your job. If you were to begin at that time taking distributions from your 401K's, or pulled out all your 401K's, decided to draw them out, that would be an issue you'd discuss with the KY unemployment system. The situation would depend in a large part on whether or not it was considered an employer contribution pension, and as I said, most generally it is not. Lots of people pull out all their retirement when they lose their job, and draw unemployment while they are doing it.

    Unemployment insurance is not and has never been based upon your income. Therefore taking out 401K money usually does not make you ineligible based on that you "have enough money to live on without unemployment" or anything like that. It doesn't matter if you are a trust fund baby, your wife wins the lottery, how much money you have in your IRA's or have in savings accounts or whatever. No questions are ever asked about your income, and you should never postpone filing for benefits until you are really desperate, have spent up all your other assets, etc.

    IRA's are usually a very very good idea. Unemployment insurance, if you were laid off or determined to be let go through no fault of your own from a job is not very much money, and it ends abruptly after about six months and until you have worked again for covered employers. It's a very small income replacement stop gap, and is absolutely not income based. In KY at present it tops out quickly at $415 a week for 26 weeks, no matter how much income you have been making. How to qualify for unemployment, if and when you might lose your job, is not ever anything that should affect your retirement planning over the long term. Are you thinking your job may end or your employer may close soon?

    They only use your actual gross wages from reports provided by your employer in the quarters they are using at that time to calculate your unemployment insurance benefit amount. That you have an IRA or a ROTH or whatever will not reflect in those quarters, and will have no effect on how much you are approved to draw.

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