​

Financial Samurai

Slicing Through Money's Mysteries

  • About
  • Invest In Real Estate
  • Top Financial Products
    • Free Wealth Management
    • Negotiate A Severance
  • Buy This, Not That (Bestseller)

Can I Collect Unemployment Insurance If I Have Passive Income?

Updated: 08/08/2021 by Financial Samurai 67 Comments

Can I collect unemployment insurance

Are you wondering whether you can collect unemployment insurance if you have passive income? The quick answer is YES. Collecting unemployment insurance (unemployment benefits) is completely separate from how much you make in passive investment 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 any work 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! But can you collect unemployment insurance benefits if you have passive income or investment income?

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. The reason is because you have to actively manage the portfolio and you could blow yourself up in a downturn.

Does Passive Income Affect Unemployment Benefits?

My friend and I got to talking about the article, “Don’t Quit, Get Laid Off Instead.” We began to wonder what if we successfully engineered our own layoffs?

Would we be able to collect ~$1,800 a month in unemployment income while generating five figures a year in passive income?

In my research I spoke with people in human resources, a couple of unemployed folks, the CA unemployment office, and did extensive searching online. The conclusion is it doesn’t matter if you make passive income. You CAN collect unemployment benefits if you have passive income.

There’s no limit either. You can make $1,000 a year or $100,000 a year in (unearned) passive income and still collect unemployment insurance benefits! As long as you didn’t perform any work, you can be eligible to get unemployment benefits.

Example Where Collecting Unemployment Benefits is Perfectly Fine

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.

So you buy ten, $250,000, 7-year CD’s with a 4% interest rate. The reason why you buy ten, $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 insurance benefits.

Investment Income And Unemployment Insurance

Why can you collect unemployment insurance if you have investment income? The $100,000 a year from investment income is separate from your job compensation. You are not working to make that money. 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 were to deny your unemployment claim, you have recourse.

Perhaps the more interesting question is, “Should you collect $1,800/month in unemployment benefits if you have enough passive/unearned income to live?”

My answer is, absolutely yes. Just look at your W2 and see all the federal and state income taxes you pay each month. Fair warning – you might feel sick when you see how much comes out for taxes.

Passive Income Is Not Employment Income

The simple way to understand what type of income could deny or reduce an unemployment insurance claim is employment. Did you receive your investment income or passive income in exchange for work or employment? Nope! So it doesn’t count against your unemployment benefits claim.

There really isn’t a moral question to taking unemployment insurance while earning enough money passively to survive. You and your company paid for unemployment insurance all the 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 just up and quit your job voluntarily, you get nothing!

The value of a severance package has gone way up because of enhanced unemployment benefits and a decline in interest rates.

Passive Income X Factor – Start A Website

It’s been over ten years years since I started Financial Samurai. And fortunately, I’ve worked hard to build a good passive income stream online. 

I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But it just took getting started one financial crisis day in 2009. Now it’s over a decade later and Financial Samurai is still going strong.

Do you enjoy writing, connecting with people online, and want more freedom? Learn how you can set up a WordPress blog like mine in 15 minutes with Bluehost.

Brand yourself online, connect with like-minded people, and find new consulting gigs. You have the potential to make a good amount of income online one day.

For example, you can sell your own products or recommending others’. Not a day goes by where I’m not thankful for starting Financial Samurai in 2009.

Blogging For A Living Income Example: $300,000+
A real income statement example from a blogger. Look at all the income possibilities! CLICK the graph to learn how to start your own site.

For more nuanced personal finance content, join 100,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience. 

Tweet
Share
Pin
Flip
Share
Buy this not that instant bestseller Wall Street journal banner

Filed Under: Career & Employment, Insurance

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse (RIP). In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Current Recommendations:

1) Check out Fundrise, my favorite real estate investing platform. I’ve personally invested $810,000 in private real estate to take advantage of lower valuations and higher rental yields in the Sunbelt. Roughly $160,000 of my annual passive income comes from real estate. And passive income is the key to being free. With mortgage rates down dramatically post the regional bank runs, real estate is now much more attractive.

2) If you have debt and/or children, life insurance is a must. PolicyGenius is the easiest way to find affordable life insurance in minutes. My wife was able to double her life insurance coverage for less with PolicyGenius. I also just got a new affordable 20-year term policy with them.

Financial Samurai has a partnership with Fundrise and PolicyGenius and is also a client of both. Financial Samurai earns a commission for each sign up at no cost to you. 

Subscribe To Private Newsletter

Comments

  1. Bob says

    November 11, 2021 at 8:04 pm

    I’ve called my unemployment department 45 times since October 19, 2021 to try to get a hold of somebody in the “general information“ department. However I always get a message automated message that says “we are sorry we’re not able to find an available agent at this time. Please call back again later.“ Then it hangs up on me. does not even allow a “call back.“

    I live in the state of Nevada, trying to figure out whether if I get roommates here in my home (passive income) if that’s going to disqualify me for unemployment. does anybody have any idea?

    Reply
    • Financial Samurai says

      November 11, 2021 at 8:23 pm

      I doubt it. Unemployment benefits are tied to W2 income from a company. Renting out rooms is side income/investment income. You are still unemployed.

      Reply
  2. Jerry K says

    July 28, 2017 at 3:52 pm

    I was laid off in 2003. Luckily, I had been investing in multifamily Real Estate, and at that point, had accumulated something like 60 apartments. In fact, my boss said he chose me because “I was the rich guy”.

    I was careful to disclose my RE activities during my unemployment insurance telephone interview, and it was OK.

    Now my wife has been laid off, and the issue is here again. Telephone interview next Wednesday! I have advised her strenuously to disclose – we are not desperately in need of the unemployment money and it would be very inconvenient to be arrested for fraud.

    Reply
  3. ANON says

    May 18, 2012 at 4:51 pm

    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.

    Reply
    • Financial Samurai says

      May 18, 2012 at 7:50 pm

      You can only get food stamps if you make under $1,100/month here in SF and UB is $1,800/m.

      Reply
  4. Charles says

    February 21, 2012 at 2:57 pm

    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?

    Reply
    • Janna says

      February 22, 2012 at 4:14 pm

      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.

      Reply
« Older Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *


n

Top Product Reviews

  • Fundrise review (real estate investing)
  • Policygenius review (life insurance)
  • CIT Bank review (high interest savings and CDs)
  • NewRetirement review (retirement planning)
  • Empower review (free financial tools and wealth manager, previously Personal Capital)
  • How To Engineer Your Layoff (severance negotiation book)

Financial Samurai Featured In

Buy this not that Wall Street journal bestseller

Categories

  • Automobiles
  • Big Government
  • Budgeting & Savings
  • Career & Employment
  • Credit Cards
  • Credit Score
  • Debt
  • Education
  • Entrepreneurship
  • Family Finances
  • Gig Economy
  • Health & Fitness
  • Insurance
  • Investments
  • Mortgages
  • Most Popular
  • Motivation
  • Podcast
  • Product Reviews
  • Real Estate
  • Relationships
  • Retirement
  • San Francisco
  • Taxes
  • Travel
Buy this not that WSJ bestseller 728
  • Email
  • Facebook
  • RSS
  • Twitter
Copyright © 2009–2023 Financial Samurai · Read our disclosures

PRIVACY: We will never disclose or sell your email address or any of your data from this site. We do highly welcome posts and community interaction, and registering is simply part of the posting system.
DISCLAIMER: Financial Samurai exists to thought provoke and learn from the community. Your decisions are yours alone and we are in no way responsible for your actions. Stay on the righteous path and think long and hard before making any financial transaction! Disclosures