A lot of people dream of starting their own business. But what happens when you don’t have the money to do it? For many people, their 401k is the answer.
In this blog post, we will discuss how to start a business with your 401k. We will cover everything from setting up your account to getting started in your new venture.
So whether you’re just starting out or you’ve been dreaming of starting your own business for years, this blog post is for you!
There are three ways you can use your 401(k) to start or buy a business.
Cash Out 401k Funds
You can cash out the funds and use them to start your business. This is the easiest way to get started, but it’s also the most expensive.
You’ll have to pay income taxes and a penalty for withdrawing the funds before you’re 59 ½ years old.
Borrow Against Your 401k
This option is a bit less expensive than withdrawing the funds outright, but it’s still not ideal. You’ll have to pay back the loan with interest, and you may be limited in how much you can borrow.
This can very attractive depending if you are especially eager to get your business launched, but be aware that will have
Use a Rollover for Business Startups (ROBS)
This is the most complicated way to go about it, but it’s also the best option. You can fund your business without paying any taxes or penalties.
This is because you’re not technically withdrawing the funds from your 401(k). Instead, you’re using them to purchase stock in a new corporation that will own and operate your business. The money stays invested while it’s being used for startup costs.
You’ll only pay taxes on what you withdraw as salary or dividends later down the road.
Now that you know the options, it’s time to decide which one is right for you.