401k withdrawal and unemployment
My husband lost his job after 42 years the beginning of January for not meeting the company’s performance objectives. He applied and was approved for unemployment benefits. I collect a very small pension. We have a fair amount of debt that was manageable prior to his job loss but the UI benefits and my pension will not cover payments so my husband decided to withdraw money from his 401k to pay off some of the debt. How will this affect his UI benefits?
Terry Says
This is not current income, so it is not reportable and won’t impact unemployment benefits. It will be taxable income, however when you file your 2021 tax return, if you characterize it as a withdrawal. Since he already lost his job, he can’t consider it a tax-and penalty-free loan.
