Can I Collect Unemployment Insurance If I Have Passive Income?

My friend and I have both developed a healthy amount of passive income over the years.  We are talking true passive income where we don’t have to do anything to make money.  It gets us excited thinking about passive income because we have the optionality of quitting our jobs, moving to some tropical paradise, and not die alone if we don’t want to!

My definition of passive income comes directly from CD interest income.  With an average yield of 4% (7-yr CD’s), my passive income isn’t sexy by any means.  But, it’s a great feeling knowing the principle will still be there and then some years from now.  Collecting dividends is not my idea of generating passive income, because you have to actively manage the portfolio as you could blow yourself up in a downturn.

We got to talking about the article, “Don’t Quit, Get Laid Off Instead“, and we began to wonder what if we successfully did engineer our own layoffs?  Would we be able to collect the ~$1,800 a month in unemployment income while generating five figures a year in passive income?

After speaking to people in human resources, a couple unemployed folks, and doing some searching online, I’ve come to the conclusion that it doesn’t matter if we make $100,000 a year in passive (unearned) income, we still get to collect unemployment insurance.


Let’s say you work for 20 years and diligently save a majority of your after tax income every year. You somehow amass $2.5 million and decide to go really conservative and buy ten, $250,000, 7-year CD’s with a 4% interest rate. The reason why you buy 10, $250,000 CD’s is because of the $250,000 FDIC guarantee limit ($500,000 for couples per account). Fair enough.

You love your job, but due to a restructuring, you are let go. The $100,000 a year you earn in passive income has no bearing on your ability to collect unemployment benefits since the $100,000 a year is a result of your past work.  You are no longer working to make that money, as that money is now working for you. Your company could technically refute the unemployment benefit claim upon realizing you earn six figures in interest income, however, you don’t have to reveal your personal finances to your employer. And if they do deny you, you have recourse.

The more interesting question is, “Should you collect $1,800/month in unemployment benefits if you have enough passive/unearned income to live on?” My answer is, absolutely yes. Just look at your W2 and see all the federal and state income taxes you pay.  Mine makes me absolutely sick. Your employer is happily paying you less than you could truly earn so they can pay for unemployment insurance.

There really isn’t a moral question to taking unemployment insurance while earning enough money passively to survive.  You and your company have paid for it after all those years you’ve worked, and if you’ve found yourself out of a job for reasons no more than performance related, then you deserve to collect some money back for once!

Finally, if you can, always try and get laid off rather than quit. You’ll receive severance, unemployment benefits, and ongoing training. If you quit, you get nothing!

Passive Income X Factor – Starting A Website

It’s been around six years since I started Financial Samurai and I’m actually earning a good passive income stream online. The top 1% of all posts on Financial Samurai generates 31% of all traffic. The average age of the top 1% posts is 2.3 years old. In other words, after putting in the hours to write some very meaty content over two years ago, 10 posts consistently generate a monthly recurring income stream that’s completely passive.

I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with Bluehost. Who knows where your new adventure will take you?

Contract For A Ridesharing Company

I’ve recently tried out driving for Uber because they are currently giving up to a $300 bonus after you make your 20th ride. After 125 hours and 53 rides, my gross pay is $36/hour, which is not too bad! I can see how people can easily make an extra $2,000 a month after commission and expenses with Uber or any ridesourcing company. I’d definitely sign up and drive until at least the bonus . Every time I plan to drive somewhere, like my main contracting gig down in San Mateo, I’ll just turn on the Uber app to try and catch a fare towards the direction I’m going. Why not make extra money?

$36/hour is a huge pay cut for me and it’s a humbling experience as well. But discovering the whole ridesourcing experience first hand is fascinating! I’ve got so many stories to share in the future about my experiences picking up random people. You can make $40,000 a year easily if you work a normal 40 hour a week shift based off my experience. The process is so easy to make money as they pay every week and you can start getting fares immediately.

Photo: Jitsu Relaxing At The Four Seasons, HK.  SD. Updated on 9/1/2015

Learn How To Negotiate A Severance Package

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    If you can collect then by all means collect, you paid enough over the years that you deserve it. And to answer your other question, no I don’t think there is any incentive whatsoever to get a part time job when you are on unemployment (unless that job pays cash). I just wish I could have engineered my own lay off and then collected unemployment from here in Thailand, that would have been sweet, especially with the current 92 week allowance back in my home state.

    • says

      It seems kind of silly that any on the books part-time job immediately deducts from your UI monthly limit. There has to be a better way. We paid into the system!

      Yes, engineering your own layoff really is the way to go. But, I think they’d track your IP address renewing your IP in Thailand.

      • says

        Yes I’m sure they would, although there are always proxies :)
        I wouldn’t do that though. I would take the money if I was compliant with the rules and regulations, but I wouldn’t try to collect if I wasn’t compliant. Even though I did pay into the system for many years, I don’t think that entitles me to lie of cheat to collect.

  2. says

    I think part time workers should receive unemployment benefits as well. Incentivising people to not work is detrimental to a recovering economy in my view. 4% CDs sounds like an awesome deal. In the upper half of North America, our equivalent investment vehicle, the GIC, is not as generous unfortunately. We’d most likely have to consider gov’t bonds to get that kind of return. Nice post. I’m glad you can collect UI while making passive income (^_^)

    • says

      I agree! Incentivize people to work at least part-time instead of NO TIME!

      4% is good… have 4.15%, 4%, 3.75%, and 3% for 7 years. I kinda dread the renewal rates in 5 years. Hopefully the economy is rocking by then!

  3. says

    I would say collect and if you are happy with your passive income help those in need in a degree you see fit. And I mean really in need. For example you could help a local soup kitchen (I used to work in one) and feed some of the 46 million that are suffering from some form of hunger.

    I can’t wait to get to that point because the big business we are forced to buy from called government will be there collecting whether we make a ton of money or we don’t.

  4. says

    Thanks for the mention Sam! I am still using my old computer, and it’s still running like a champ! I’m so glad that I didn’t go out and drop $1,000 on a new computer.

  5. Janna says

    Interestingly, in my state, if you have your own business on the side, you may be denied unemployment benefits even if you aren’t making any money on it.

    • says

      That, I can see… however, a side business is not passive/un-earned income. That’s active income, no matter how you slice and dice it.

      If you’re collecting $5,000 a month interest income from savings/CD’s, that’s passive and allowable.

      • Janna says

        I totally agree it is active income, IF it is income. But if you aren’t making any money on it, it’s not income, active OR passive.

  6. Patrick says

    I agree with one of the early comments about being able to work part-time and still collect unemployment benefits. For a vast majority of people who were working they had more than $1,800 a month in expenses, so the money they are receiving will not cover all of their bills. If they are able to get some work for some extra money while they search for a new full-time job that should be encouraged and not punished. I have known people who turned down jobs because it paid less than unemployment which is almost criminal in itself in the government is encouraging you not to work.

    I think passive income is the greatest source of wealth in this country, if more people were making smarter decisions then we would all be better off.

    • says

      Agreed Patrick. You know the system is messed up if people are declining work b/c unemployment pays more! The unintended consequences of trying to insure people don’t take advantage of the system.

  7. says

    I can see how UI would be allowed if the income was from CD’s. I probably wouldn’t turn down free money. Who would, right? But, Would income from blogging disqualify your earnings? Or does it vary by state as Janna suggests? Not that I am planning my lay off. ;)

  8. says

    I had a temporary unexpected gap in employment and decided not to collect unemployment payments.

    No moral reasons; I just didn’t want the hassle nor did I need the cash.

    I do think that the current structure of unemployment and welfare is not conductive to seeking gainful employment. The incentive situation is not optimal.

  9. says

    In Canada, you can’t. You’re allowed to make up to a certain amount of your EI benefits, but after that it takes away from your EI – so, for instance, if you make $1800/month on EI, but then have passive income of $700/month, you’d be able to make $1100/month on EI. So, I guess you can – it’s just to the expense of your EI.

    • says

      Oh gosh, that sucks…….. but, that does make sense. In the US, every state is different, since it’s the states that pay first, until the benefits are exhausted and THEN the federal supported UI kicks in. I’m no export, I’m just reporting what I find.

  10. says

    Unemployment benefits are not means tested! If Romney were fired or laid off from a job, he would be eligible for unemployment. If you work part time, the earnings are used to reduce your unemployment benefits. The intention of unemployment is to give you a safety net or subsistence while you are looking for another job. Typically, unemployment is paid by the employer based on a rate using their experience factor. If the employer fires a lot of people, their rate will be high.
    Some people think receiving unemployment is a discourages looking for work because you are getting money for not working. Even $1,800 a month is hardly enough to keep me happy. Can I collect as a retiree? LOL!

      • says

        Unfortunately, my status will change to retiree and I won’t be able to collect unemployment. I would have to get RIFed on a March 15th list and retire after the last day of school in June. I plan on putting in for retirement before that because it takes months to do!

  11. says

    Sounds like I need to start working on a plan to get laid off!…wait…first I would need to build a passive income stream first.

    Forgot about that part. :)

    It’s great they don’t “means” (passive income) test unemployment insurance. Only the government does that kind of stuff!

    • says

      Wow! Way to take advantage of the system! The thing is, rental income properties are considered passive on our taxes. Man, I totally forgot I have positive rental income cash flow as well! lol.

  12. says

    Thank you for the inclusion, Sam! I know that for me that this was never an issue. It would be too long and hard to get laid off, and if you get fired for performance reasons, there are *no* unemployment benefits here in Canada. The passive income also doesn’t come into the calculation, but you do need to be actively looking for work and not sitting on your butt and collecting. ;) With $100k a year though this would not be a big worry for me.

    • says

      I had a goal to reach $100,000/year in passive income. Unfortunately, CD interest rates have gone from 4% to 2% for 7 year duration, which means I need about $5 million cash now. It’s hard to get there now, which is why Im focused on income generation by other means.

  13. says

    “Why would anybody bother working part-time, if there is such a rule that any income earned precludes one from receiving unemployment benefits?” Another thing is that (in Canada at least) if you become self-employed, you no longer qualify for UI. I imagine blogging and making some side income off of that would count.

  14. says

    Thanks for the shout out, Sam!

    I guess I have been fortunate in that I have always resigned when I left a job. Several people tried to convince me to apply for unemployment when I left my last job due to the unethical/abusive circumstances, but I honestly didn’t think the battle would be worth it since I left voluntarily. When I was a supervisor with the company, I saw how hard they fought to avoid paying – the HR lady bragged once that they’d only had to pay 2 claims in the 14 years she’d worked there.

    For those who are laid off or unjustly terminated, I firmly believe they should be eligible for UI regardless of their assets. If the assets were so amazing, they probably wouldn’t have been working in the first place. People shouldn’t be punished for making prudent choices during the time they’re employed.

    • says

      No problem Andrea. It must be freeing to resign on your own accord.

      That is a scary story by your HR lady. I truly am kinda fearful of the HR ladies everywhere. That’s why I got mine a silk scarf from my last vacation abroad :)

  15. says

    While I agree that if you paid into the system for a specific purpose (unemployment), you should be entitled to to take out when the time comes. It’s an insurance arrangement.

    That said, it strikes me that the system has been designed in a manner which gives people an incentive (i) to underperform at work and (ii) not to work at all once they have been laid off.

    • says

      I don’t think UI incentivizes people to underperform at work. It *might* incentivize people to be more picky in their job search.

      A lot of people, including myself would appreciate a break and a little return from the government.

  16. says

    If only there were some sort of “loophole” like this to “get back” all the money we’ve paid into home-owners or auto-owners insurance over the years.

    I wouldn’t see the moral problem with collecting the unemployment if that is what you actually are, unemployed. I personally would have a moral problem though if I had no intention of seeking further employment.

    Thanks for the link in this one Sam. Much appreciated.

  17. Janna says

    Unemployment insurance is intended as a safety net for those who lose their jobs by no fault of their own. Although I agree that you should be entitled to collect U.I. if you truly lose your job, your talk of engineering your own layoff bears some similarities to torching your own property to collect the insurance money.

    Also, while there are a lot of people out there struggling to survive on U.I., you make light of this as an opportunity to enjoy a vacation in the tropics.

  18. says

    Seems to be a fair trade-off, a lame return on capital in exchange for the passive income classification (as it relates to the IRS, and not the blogosphere.) I am somewhat surprised that income from passive investments is not a consideration in whether or not one receives unemployment. Such rare logical thinking from government is worthy of applause!

  19. John says

    Can you elaborate on “however, you don’t have to reveal your personal finances to your employer. And if they do deny you, you have recourse.” especially since you also live in the San Francisco bay area the advice would be helpful.

  20. Andrea says

    I’m in Canada and in my province, our system is broken. I have no qualms about collecting if I could after I was legitimately laid off, if I had passive income too… all the better. I pay for it too. The system is a little different here though as stated before, anything you earn gets subtracted from your unemployment so. I won’t be facing this dilemma anytime soon (nor so I have enough cash to be earning passive income)

  21. Rachel says

    Sam, I was laid off for about 6 months or so back at the height of the recession. We got full unemployment benefits. The thing is, I could have also worked part time and made up to an additional $100/week that wasn’t counted against my benefits. Anything over that amount, would have reduced my benefit amount by that much. The max benefit for unemployment is determined by the state you live in along with anything that would reduce or negate benefits. My job was on the border between KS and MO. My friends in MO got $100 less/week because of the state they lived in. Also, while on unemployment you have to have proof that you are actively seeking a job. If they audit you (and that’s a big IF), you have to provide records of every job you applied for or you’re screwed. It was 5 jobs/week if I remember right. Not rocket science, but by the end of the term I was starting to run out of places to apply that I was qualified for and would pay enough to meet my expenses. Sorry for such a long comment, but it didn’t really seem like anyone who had actually collected unemployment in the states had commented.

    • says


      This is fantastic perspective which I really appreciate. It really does seem like it all depends on the rules of each state. Were you able to easily collect for those 6 months? Or did the government make it hard on you?

      Could you have gotten another 26 weeks if you applied since our government has a 99 week policy?


      • Rachel says

        It wasn’t hard at all to collect for 6 months. You call in or log into their website each week and answer yes/no questions and collect the money. The kicker is having your back up in case you get audited. Since I was part of a large layoff, the company I worked for set up unemployment claims for us, and we were able to begin collecting immediately instead of waiting 2 weeks for our first check. I actually got a job right at the end of the first term of unemployment benefits. I had just applied and been approved for emergency benefits which would have started the day I started working.

        • says

          Thanks Rachel. Sounds like an honorable company you worked for, and a relatively painless way to collect UI. So it really is at the power of the company that is letting you go it seems…. and less so the government.. Is this a correct assumption? If so, it is best to leave on good terms.

  22. says

    Now that is an interesting issue you bring up. I have no idea as I myself believe social lending and stocks are active investments. However, I would be mad as all hell if I was disqualified just because I have stock or social lending investments I built from my working days.

    Can you inquire with your social lending rep?


  23. Darwin's Money says

    I’ve never been a fan of the mantra that “I paid into the system so I deserve it”. When I grew up, there was a stigma and some amount of shame attached to being on unemployment as a functional adult in a decent job market. I understand this job market is different, tougher, and nothing like we’ve seen in generations. I get that. But I’ve heard all too many people basically high fiving and loving this 99 week thing when they either a) are scamming the system or b) don’t need government assistance.

    I’d like to think I could find a job with the time that I would anticipate severance to last which is often 6-12 months for a 30-50 something professional. Then, I’d like to think I would only take it if I needed it. I dunno, a millionaire, billionaire, whatever, is legally entitled to it. But we’ve been increasingly seeing that it doesn’t matter what’s right or wrong, just what’s legal.

    • says

      In this economy, where there is no more loyalty to the employee, and people are being fired at will, left and right after giving DECADES of their lives to the firm, the LEAST people deserve is getting unemployment benefits.

      There is no shame, and no stigma whatsoever.

  24. says

    I earn a small amount of income from CDs so I’d be really bummed if I lost my job and didn’t qualify for unemployment because of that since the interest is no where near my salary pay. It doesn’t seem likely that passive income like CD interest would make someone ineligible. I don’t think the government is savvy enough to even check for that. Besides as you said, the income that was earned to fund the CDs occurred before getting laid off so it shouldn’t matter, at least it shouldn’t imo!

  25. skrpune says

    UI claim filing rules vary wildly from state to state, and there may be limits on your ability to file in the future after you’ve filed once in your state. This means that if you file now during what may turn out to be a short term period of unemployment, you may not be able to file for UI assistance for a future, longer term layoff when you really need the money. (In this job market, it’s not only the folks with years of experience that get laid off – often times, it’s the “last hired, first fired” rule that applies.)

  26. Charles says

    What if you have 5 side jobs and then got laid off from your primary day job? do you not qualify for unemployment if your total side job income was just as much as your day job income?

    • Janna says

      It may depend on the state, but in my state, they withhold 25% of your unemployment benefit for each day (or part of day) you work. So, if you worked on 4 separate days in your side jobs, you would lose 100% of your UI Also, if the amount you earn in your side jobs for a week total more than your potential unemployment benefit, you would lose your benefit for that week, even if you worked less than 4 days.

  27. ANON says

    I got fired from my job for not meeting sales. Got unemployment. Saved enough money to be off for a year plus I got unemployment all while finding a job that better suited my needs. I’d say if you can pull it off do it because we paid into this system and who know if we will ever get it again. Also, get food stamps while you can. Working people never rep the benefits of the system. I’m not promoting working the system well, yes, work the system.

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