Financing through 401K loan

Ravi

Hello,
I am in the process of starting a new business and recently learned about possibility of financing my startup through my 401K.  It sounds like a good concept (my 401k stays in tact while I get a loan against it).  Has anyone here used this method of financing?  Can you share with me +/- of this type of financing?
Thanks,
Ravi

robertj

Ravi:
Some employer`s allow you to borrow from your 401k account - many do not.
As previously mentioned, if you leave the company - your loan would need to be repaid or would become an early withdrawal and be subject to tax a nd penalty. Since cash is precious - I don`t recommend "wasting" 10% on the penalty.
If you are talking about an IRA (not a company 401) :
1. You cannot borrow against your IRA funds
2. There are some "interesting" ways to use IRA funds to invest in your own business. Generally speaking, one should have $100,000 in their IRA to make this approach worthwhile.
 
Robert Johnson

jlukasavige

No mentioned is this.  If you are married, death is the same as leaving the company.  That full amount is due by your spouse immediately.  Do you want to leave her with that burden?  Save up and pay cash for it.

MattTurpin

I don't know whether I was smart to do so, but I borrowed the max allowed from my 401K this very evening. My check should be in the mail within a few days. Starting my cafe is my future. If I make the income my cafe projects, I'll be able to put together a better future than a 401K at my current job could really offer. That, and I'm not likely to remain employed long - not by choice, but not something I'm opposed to. I could use the unemployment to get the cafe going. At the rate the allowed collection time is expanding, I'll be retirement age before it runs out. Working a day job makes starting a better job challenging, that's for sure. Anyway, I rambled. If you need money to finance a startup, and you have it in your 401K, it seems like a good deal to me.
EDIT:
I do have a question though. I'm going to make up numbers.
My entire 401K Account = 10,000
I borrow 5,000
I lose my job.
What happens to the other 5,000? I don't understand how the penalty system works. They say you get penalized on the amount of your loan. But, I would imagine that you'd receive the other half of your 401K? At least your vested allowance? If the other half disappears, while I get penalized to no end on the little bit I borrowed, that hardly seems right, but, when something hardly seems right, it's usually the case.

seomarketgoal

It is a good idea to borrow money from your 401k account, But there are also some terms and condition for that. Although, the implications on 401k loans are very minimal and normally you get a long time to repay it, Following are some conditions when you should not take a 401k plan loans.
a) When you are planning to leave the job.
b) You are going to retire in a couple of years.
c) You can not contribute regular.

allianceonellc

Taking a loan from your retirement account can get you through an emergency. Entrepreneurs may be able to use their 401k indirectly to fund a startup. However, borrowing against your 401k should only be considered as a last resort loan option.

ReneePhillips

Good everyone.
My name Mrs, Renee Phillips, i am from USA CA , i am married, i have been searching for a genuine loan company for the past 2 years and all i got was bunch of scams who made me to trust them and at the end of the day, the took all my money and left me moneyless, all my hope was lost, i got confused and frustrated, i lost my job and find it very difficult to feed my family, i never wanted to do anything will loan companies on net anymore, so went to borrow some money from a friend, i told her all that happened and she said that she can help me, that she knows a loan company that can help me, that she just got a loan from them, he directed me on how to apply for the loan, i did as he told me, i applied, i never believed but i tried and to my surprise i got the loan in 24 hours, i could not believe my eyes, i am happy and rich today and i am thanking God that such loan companies like this still exist upon this fraud stars all over the places, please i advise everyone out there who are in need of loan to go for Mr. Robert .M. Clark Email via ; ( [email protected] ). he did not know am doing this for him,but i just have to do it because a lost of people are out there who are in need for a loan., they will never fails, your life shall change as mine did.

Thanks and Good Luck.

anushkachhakrabarti

I think taking a loan from your retirement account can get you through an emergency.