Can I Invest While on Unemployment?

Saving for retirement and being unemployed at the same time seems like an impossible situation. While states do not prohibit you from investing during a time of hardship, there are provisions within some that will make it challenging to stay qualified if you take investment income. There are some situations and ways of investing in which it makes sense to invest while unemployed.

Managing Cash

When you become unemployed, managing your cash flow is critical. If you have a retirement or another investment with an economic hardship exception, you can borrow against it or cash it out with few or no penalties. If you do, you should invest the money in a liquid investment, such as a money market, that you can access yet still earns a small amount of interest, keeping in mind income maximums in your state for maintaining unemployment benefits.


Individual retirement accounts allow an investor to deposit money for retirement in a tax-deferred vehicle and earn a tax deduction or credit. If you have enough liquid cash when you become unemployed and you expect to find a job within a short period, it may be wise to continue funding your IRA. According to Financial Web, you should consider a post-tax IRA such as a Roth IRA, which is taxable at your low income level but still may be deductible against your income. When you do withdraw the money from a Roth IRA, you will have already paid the tax on it. Consult your tax advisor for your specific tax circumstances.

Investing in Yourself

Investing in yourself is a good strategy in a time of unemployment. Take this challenge as an opportunity to go to college or enhance your job skills in some other way. You may be eligible for considerable financial aid benefits ranging from Pell grants to work-study opportunities to get hands-on experience. Volunteer and seek new relationships to enhance your job search. Work on your physical conditioning and appearance so you will be more confident when you land an interview.

Other Considerations

If you invest in an instrument that provides a cash dividend, you likely can still collect unemployment benefits, according to Financial Samurai. Most states allow a certain percentage of your previous income in new income before they start reducing your benefit. Once you meet this threshold, your benefits are reduced by a percentage, not typically dollar per dollar. Consider as well the number of years until you retire. If you have almost reached the age of retirement your ability to tolerate risk is likely much lower than if you have decades until you retire.