Question about taxes and unemployment.

[foopy]

The 457 plan is a type of non-qualified tax advantaged deferred-compensation retirement plan that is available for governmental and certain non-governmental employers in the United States. The employer provides the plan and the employee defers compensation into it on a pre-tax basis. For the most part the plan operates similarly to a 401(k) or 403(b) plan most people are familiar with in the US. The key difference is unlike a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59½ (although the withdrawal is subject to ordinary income taxation). Another difference is that 457 plan participant cannot make designated Roth contributions as participants in appropriately amended 401(k) and 403(b) plans can. Also 457 plans (both governmental and non governmental) can allow independent contractors to participate in the plan where 401(k) and 403(b) plans cannot.[1]

why do you guys keep talking about penalties?

the 20% you may have seen are for taxation purposes (like the withholdings from your paycheck, HEY FUCK YOU FICA!).


darus grey has the most accurate reason not to withdraw; the solid cap on what you can contribute. -which may not be applicable to you.

however, there are still many variables. and because its a 457 plan, and not a 401k, there are many viable reasons to withdraw the funds. (unlike a 401k, where i'd recommend it only for extreme hardship.)

i'd really need to know more about your finances before being able to make a real suggestion.



edit: re: unemployment.

there should be no need to report it. its not a pension. its your personal savings. you are still eligible for UI. you paid for the insurance, you lost your job, you get to claim for it.

[foopy]

felt i should elaborate.

if you withdraw - any amount, but lets go with $6200 - you will get a check for $5000. that $1200 doesn't vanish into penalty land. rather, it's set aside as pre-payment for whatever taxes you may owe at the end of the year.

now since you made this withdrawal in 2011, it counts as income for 2011. when you file your taxes NEXT year, you simply add $6200 to your total income.

to give you an example. if you don't find a job and make zero dollars during all of 2011, your entire income for the year will be the $6200, putting you at the 10% tax bracket, you'd actually get a refund check for 600 bucks!


edit: man, the more i think about this 457 plan, the more awesome it is. it's basically a savings account/liquid cd, but without the 1099 at the end of the year. awesome. too bad most of us can't get one ><;

[Altariel]

Though things might be different in NY, these plans are generally considered a form of deferred payment meaning anything you cashed out would be considered income for the purposes of determining your unemployment eligibility. Taking whatever amount out would likely be grounds to defer the start date of your benefits by the corresponding number of weeks. In addition to being a bad idea because of the tax penalties, it's a terrible if you lose any payments you'd otherwise have coming.

[foopy]

...being a bad idea because of the tax penalties.

/facepalm

[Dantrag]

If it's anything like a 401k the bank applies a 10% penalty for removing it before you're technically allowed to, that was part of the fee I was talking about.

[foopy]

If it's anything like a 401k the bank applies a 10% penalty for removing it before you're technically allowed to, that was part of the fee I was talking about.

The key difference is unlike a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59½

[Dakana]

Do you have good credit? If so just get a new credit card with free balance transfers and a lower interest rate. You'll also probally get no interest/no payments or like 6 months so win/win.

[Odesseiron]

Forgot about my own thread. Yeah my credit is pristine for the most part. My FICO is 750. That's pretty good, as far as I know. I don't know anyone with their credit in the 800's. I said somewhere earlier in the thread what happened when I tried to get a low APR CC. Everything is looking okay though. I won't be dipping into the 457k. It looks like we may get our jobs back, so I'll just keep it in their hands for the meantime. It just won't really be growing because I'm not contributing.

Foopy is absolutely right about everything he posted. What I was most concerned with when withdrawing this, is that NY State would somehow catch up with it in a year or 2 and say "Hey! You have an additional $6200 you didn't report while you were collecting!" Whether it be a personal savings or not. THen I'll be forced to pay back the adjusted unemployment. New York sucks like that. At least that is my understanding of it.

Either way, I'm not touching it. I'm selling a ton of shit on half.com/ebay and between that and unemployment + whatever off the book side jobs I can get, will definitely keep me afloat while we are waiting for the lawsuit to go through with our jobs.

[Odesseiron]

Hate to bump this again, but has anyone here actually been on unemployment? I'm guessing yes as there a shitload of people on these forums.

I'm not looking to stay on unemployment for the 93 weeks that they offer, but I at least want to stay on it for a few months, while the decision about the lawsuit my job is going through is cleared up. It could be anywhere from 2-10 months. There is a strong possibility that we could end up with our jobs again, as the precedent for this was established in a prior lawsuit 15 years ago.

Anyway, I'm not going to find anything near what I was getting paid, for the amount of stuff I had to do, and I'm sure as hell not going to get some dead end retail job that pays LESS per hour than what UE pays. Taking a 35 hour work week into account (which is what I worked) UE pays me $10 an hour. Min. wage is 7.25 an hour.

I guess my actual question is.. when coming to unemployment, NYS says you need to actively be searching for a job and keep a record of it. What does actively searching mean? Submit a few resumes a week? 10? I have no idea. There are no specific unemployment offices anymore. Everything is phoned in or done through the web. Once every few months you need to go to a "One Stop Employment Center" and take some course, and I presume bring in your job search. I don't want to look TOO hard, as the chance of us getting re-employed is pretty high. At the same time, I don't want to make it look like I'm not looking, and lose my benefits. Don't mistake my intentions, I don't just want to be a leech here, just asking for opinions.

[Darus Grey]

1-2 a week is enough to not get in trouble, during the first 6 months~ you are not required to submit resumes to any position that pays less than what you made, and you are not required to accept any job offers you get for fields of work outside what you did.

Realistically they rarely check up on this shit, especially now when their case-load is so high.

You also don't have to submit resumes to places actively looking for employees, so it's really easy to pad the record.

[archibaldcrane]

Only $350/wk in New York? Out here in California I was pulling down $475/wk last summer on UI. Shit's so cash.

[Odesseiron]

Well it's $405 pre tax, so you figured about 350 after taxes taken out. Fuckin New Jersey is $600 a week. That shit is insane. I would probably not opt to work for 3 years if I was getting that much for doing jack shit. I don't know how they expect anyone to live on that shit, especially if you've got a family and everything. It pays higher than minimum wage, but fuck. I was making roughly $1350 every two weeks, so it is a pretty significant cut :/