I read an article in today’s USA Today that profiled several entrepreneurs who financed their business ventures with funds from their 401(k) accounts. Although the gamble has paid off – at least so far – for the business owners profiled, I think this type of action goes under the category of the adage “Just because we can, doesn’t mean we should.”
Now, I don’t mean to disparage any of these individuals, since using a 401(k) for start-up costs is perfectly legal. Under a ROBS loan (Rollovers as Business Start-ups), a new business creates its own 401(k) plan from savings in the owner’s individual 401(k). The “old”
However, I think both ideas are just too risky. I understand that entrepreneurs may feel like they have no other financing options, since banks still are being particularly tight-fisted. But I think using such means to launch a new and perhaps unproven venture – in
Pros, let me know what you think about this – especially you financial advisers out there. Will ROBS steal entrepreneurs’ savings and their dreams? Would you/have you advised clients for or against them?