Using retirement funds for business investment
Is there a product where I can roll 401(k) money into an IRA CD
and then borrow against it? I am 39 and have an opportunity to purchase
part of a business.
You can't borrow from or pledge your IRA, as that would be considered
a taxable distribution. However, you can borrow from certain retirement
Basically, the plan has to allow for participant loans.
You can borrow up to the lesser of $50,000 or one-half of your vested
account balance. However, if you're leaving your current employer
to explore business opportunities, you should be able to set up
your own pension plan with a rollover of the 401(k)
funds that will allow you to borrow the funds you need.
You'll need to set up a company, preferably an S corporation
that will establish a pension plan. You don't actually have to use
the S corporation for the new business operations; rather you can
use it as your form of investment in the new business. You should
meet with a qualified CPA that can help you set up the planned investment
and provide guidance on establishing the right retirement plan and
on structuring your potential investment.
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