You can cash our your 401k, but you will pay a 10% penalty, in addition to full income tax on the amount that you cashed out.

This amount will count as income as far as your unemployment is concerned and it will affect your benefits.

Yes it will affect your unemployment insurance. Additionally if you are under 59 and a half and you withdraw all of your 401K you will lose 10% as a penalty for early withdrawal. Perhaps you can find other ways to generate income, or even take a loan from your 401K rather than cashing it all out

Yes it will affect your unemployment insurance and on top of that if you cash in your 401k early, there is a 10% penalty.

Cashing out a 41k will NOT affect your unemployment. Unemployment is not a needs based welfare-like program. There are millionaires who collect unemployment.

http://www.observer.com/2010/wall-street/millionai res-collect-unemployment-benefits

The way unemployment works varies from state to state so the answer to your question can vary depending on where you're from. Some states will reduce your benefits if you withdraw from your 401K if your employer contributed to it (New Jersey is an example). Philosophically, I totally disagree with this approach...why should cashing out a 401K be any different for unemployment purposes than taking money out of your savings account? Aren't the punishments on cashing out your 401K stiff enough already? Unfortunately, the law is what it is.