Small Business Boomers

If you are a baby boomer worried about the erosion of your retirement savings, and you have extra cash in your business this year (“Cash?” “What’s cash?”), consider starting a 401(k) for your business instead of getting an IRA.  You can start a 401(k) even if you have a sole proprietorship. As a matter of fact, it’s easier to start a 401(k) if you have no employees, because the administrative regulations and restrictions are less.
The advantage of a 401(k) over an IRA is that you can put more money in it.  You can  put $15,500 in the 401(k) plan ($20,500 …read more

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Interesting question. It was posed in a recent article in Entrepreneur (online). They suggest that you may be able to borrow against a 401-k to start a business, at a reasonable interest rate. I’m not sure how that works, since you would have to borrow against (in many cases) investments that might lose value.
The other potential problem with borrowing against a 401-k is that if you lose your job, you would have to pay back the money immediately. So this strategy wouldn’t work if you’re thinking of quitting and going into your new …read more

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I found a good article that follows up on my recent post about using an IRA to fund your business startup.
This article points out what you’ll lose if you cash out before 59 1/2. It also is another dramatic example of the power of compound interest. I teach this subject to Millenials and they are always surprised at the calculations. Once, one young man asked me if I made up the numbers! (Another example of compound interest, showing that there is no substitute for starting NOW to save.)

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