25 Mar Will a retirement withdrawal affect my unemployment benefits?

Q. I was laid off due to the coronavirus and am collecting unemployment for the first time in my life. I’m 63. I was thinking about taking a SIMPLE IRA withdrawal but I’m worried about the question unemployment asks about taking retirement plan distributions when I certify for benefits. Will it affect my unemployment? These are tough times. Not only was I laid off because of COVID, but no one is hiring, either. Is it true it actually won’t affect my benefits?
— Without a job

A. We’re sorry to hear that you were laid off because of the pandemic.

And yes, these are certainly tough times.

New Jersey unemployment benefits may be negatively impacted if you take a distribution from a pension plan, said Dawn Brown, a certified financial planner with Peapack Private Wealth Management in New Providence.

She said if your SIMPLE IRA retirement plan includes contributions from the employer that your unemployment claim is based on, your claim may be reduced.

“In this situation you should try and wait to take the withdrawal when your unemployment claim ends,” she said.

“If you receive a pension from the employer that your unemployment claim is based on and only your employer contributed to the plan, your claim may be reduced by 100% of the amount of your weekly pension,” Brown said. “If both you and your employer contributed to the plan, unemployment benefits may be reduced by 50% of your weekly pension.”

A SIMPLE IRA usually includes contributions from an employer, she said.

“If the SIMPLE IRA is from a previous employer — not the one you were laid off from — then your unemployment claim should not be impacted,” she said.

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This story was originally published on March 25, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.