Can I cash out my 401K after mycompany shuts down, and still apply for unemployment benefits?
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Can I cash out my 401K after mycompany shuts down, and still apply for unemployment benefits?
My company is closing for good. I live and work in NH. I need to cash out my 401K to help with debt consolidation so I can survive in the interim. I dont want to do anything illegal. But I will be struggling if I cant get this. What are my options?
Asked on May 4, 2016 under Employment Labor Law, New Hampshire
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
Cashing out your 401k should not affect your eligibility for unemployment: the 401 is savings, not income, so taking the distribution from it doesn't affect unemployment benefits. Remember, though, that in addition to having to pay taxes on the 401 money (you tax when it is taken out, whether that is no or in 30 years), you will also have to pay a 10% penalty, because you are taking it out pre-retirement and not for an approved purpose. All in all, you might only pocket around 55% of the cash in the 401, when taxe and penalty are taken into account.
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