Downsized or Retiring Early

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Frequently Asked Questions

A: Unemployment insurance is designed to provide temporary financial assistance to eligible workers who have been separated from a former employer through no fault of their own. In Pennsylvania, you are eligible for 50% of your weekly pay for up to 26 weeks. Even if you believe you have some good job prospects out there, I would apply.
A: Don't. First, I have a theory that large lump sums are hard to come by. Second, your retirement plan withdrawal will be taxable and added to any employment income. Basically, you'd be using expensive money (possible loss of 20% to taxes) to pay off inexpensive money (4% mortgage interest rate?).
A: It depends on the employer's plan rules. There are several possibilities, if you ask for a copy of the "summary plan description" it will outline your choices. However, you may be allowed to continue to pay the loan from your personal funds. But, it's not uncommon for plans to require full repayment of a loan within 60 days of termination of employment. If you can't repay the loan, it is considered defaulted, and you will be taxed on the outstanding balance, including an early withdrawal penalty if you are not at least age 59 ½.
Submit a question to  Matthew Hanshaw, CFP®, NSSA®

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