Using Your Retirement Accountto Fund the Purchase of a Business
Fact: Most people believe that the only way you can use your retirement account (usually 401K or IRA) to purchase a business is to either pay a huge tax and penalty or take out a loan using the retirement account as collateral. But, there is a better way!
Consider this: Let’s pretend that your 401K money is currently invested in a stock, for example, IBM Corporation. Now consider that instead of investing the money in IBM you change the investment to YOUR-OWN-COMPANY, Incorporated. The money stays in your 401K account, but you simply change the way you invest it. What a great idea! But how can you do this? It is extremely unlikely that your accountant is qualified to do this for you. (In fact, most accountants have never heard of this type of financing.) There are very specific IRS regulations that, if followed correctly, allow you to make this change in your retirement account investments. We can introduce you to a company that specializes in doing this for people like you.
Not a loan: The most important thing to remember in using this method of borrowing is that you are not taking out a loan therefore there is nothing that you have to repay. This will make owning your new business much less stressful. As your business makes money, the profits that you keep in the company will continue to grow in your retirement account!
No taxes and penalties to get at the money: The money is technically staying in your retirement account so there are no taxes or penalties that you pay to remove it from your account.
The federal and state government assumes part of the risk of your business venture: Let’s say, for example, that you have $100K in your retirement account. Then you use the money to invest in a new business venture. All business ventures have some degree of risk. Right? So when you invest the $100K, how much are you really risking? $100K? Think about it. The $100K actually isn’t all yours. Part of it will belong to the government one day because you have to eventually pay taxes on it. So, really, you are only risking (depending on your tax bracket) about $60K – $70K of the money. The government is actually assuming the rest of the risk. How great is that?
Get more info: If you have money in a retirement account and you want to explore this financing option, please let us know and we will connect you with a company that specializes in this type of retirement account financing.