Will a 401(k) Disqualify Me for Food Stamps?

A 401k is a form of employment benefit in which an employee can contribute money to a retirement fund and defer payment of income taxes on it until the money is withdrawn. In some cases, an employer will match employee contributions to the fund. These types of plans are a financial asset, albeit one with special conditions of use. Therefore, while the ownership of this asset may render a person ineligible to receive food stamps, in many states it is not considered when making a determination of eligibility.


Means Test

To receive food stamps, a person must pass a means test developed by the state to which they are applying for benefits. The exact means test used by states varies, but to be eligible, a person must generally be making less than a certain amount of money and have less than a certain amount of financial assets. However, some states, such as New York, do not take into account an applicant's assets.


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A 401k fund is different than most financial accounts in that the money can only be withdrawn under certain conditions. Employers usually impose severe restrictions on each withdrawal before the age of 59.5. There is generally at least a 10 percent penalty, as well as the payment of income taxes on the amount withdrawn. This sets a 401k apart from many other types of savings accounts and therefore often causes them to be classified by state agencies differently than other financial assets.


State Laws

Each state has its standards for what qualifies as income and assets. Most states do not count 401k plans as financial assets, in part because people cannot withdraw this money without causing themselves financial damage, and because the money is designed to pay for retirement. For example, both the states of California and Wisconsin specifically request that all state agencies charged with applying means tests ignore an individual's 401k when making a determination of their financial status.



While most states do not consider 401k benefits when determining a person's assets, this does not mean that a state could not. An individual who is considering applying for food stamps should first investigate his state's criteria for food stamps applicants. To qualify for stamps, which are designed for low-income people, a person might first be required to cash out and spend his 401k.