29 Nov What happens to unemployment if I take from my 401(k)?

Q. I’m on unemployment and I took out from my 401(k). Do I need to report that to unemployment?
— In trouble

A. We’re sorry to hear that you’re out of work.

There’s a lot to know about when you take an early withdrawal from your 401(k).

But first, taking out the money should not be an issue with regards to changes in benefits, said Evan Drury, a chartered financial consultant with U.S. Financial Services in Fairfield.

“What may change your weekly benefit rate is pensions, refusing suitable work, working part-time, obtaining full-time work,” he said.

While the 401(k) withdrawal doesn’t affect your weekly benefit, Drury said you should be aware that you will be taxed at ordinary income tax rates on the money, plus owe a 10% penalty if you’re under age 59 ½.

If you ever consider taking out more money, you may want to look into hardship withdrawals in the future, Drury said. Or, if your funds are running low and you have debts you may want to discuss your situation with a bankruptcy attorney to determine what your options are, he said.

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This story was originally published in November 2024.

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.