This article tackles the tough decision of when it's a good idea to start up a business. Many near term retirees are considering tapping into their 401(k) plans to fund their dream of becoming an entrepreneur. The rule of thumb is to stay away from your retirement savings until it's time for your to retire. Read the stories of business owners who chose to take a different route.
As he researched financing options, he came across ROBS, or Rollovers as Business Startups. These allow people to use the money in their 401(k) to start a business (or buy an existing one) without paying taxes on the withdrawn funds or getting hit with an early withdrawal penalty. The process can be pretty complicated, however. First, you must incorporate a business and open a new 401(k) plan under it. Then you roll your existing 401(k) funds into the new plan. Since both accounts are tax-exempt, you avoid taking the tax hit. As owner of the new company, you can now direct what the 401(k) invests in.
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