Do I Have to Use My 401(k) Before Receiving Unemployment Compensation in Indiana?
If you lose your job unexpectedly, you may consider removing money from your 401(k) to make ends meet until you find new work. However, most states, including Indiana, don't require you to exhaust this resource before applying for unemployment. In fact, removing money from your 401(k) may even reduce your unemployment benefits.
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401(k) Withdrawal
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If you had a 401(k) with your previous employer, you can typically roll the funds over into an Individual Retirement Account after you leave the job. You can also take a loan from your 401(k), or you can make a hardship withdrawal. However, when you take out a loan, you must pay it back within five years, and when you make a hardship withdrawal, you must typically pay a penalty. You will also pay a penalty if you roll the funds into an IRA and then withdraw them.
Indiana Unemployment
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To qualify for unemployment benefits in Indiana, you must not be at fault for your unemployment and you must have earned at least $4,200 during your base period, which is the first four of the last five quarters before you filed your claim. You must also have earned at least $2,500 during the last six months of your base period. Finally, you must look for work while you collect benefits, and you must be able and willing to accept a full-time job.
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Implications
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Indiana doesn't have any regulation stating that you must use the funds from your retirement before collecting unemployment. In fact, doing so will typically lower the amount of unemployment benefits you are eligible to receive each week. However, if you remove funds from a retirement account because of an unexpected emergency over which you had no control, you won't lose any of your benefits.
Considerations
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If you are over age 59 1/2, you can typically withdraw money from your 401(k) or IRA without incurring a penalty. However, it will still affect your ability to draw your full amount of unemployment benefits unless you withdrew the money for an emergency. If you withdraw money from a retirement account and you fail to inform Indiana Workforce Development, you may receive a benefit overpayment that you must repay.
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