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How to Fund a Business With Retirement Savings in the United States

Fund-a-Business-With-Retirement-Savings
3 Minute Read
Key Points
  • Retirement success is a matter of regular savings and time
  • ROBS can help fund your dreams
  • Saving for retirement is for everyone

Wondering how to fund a business with retirements savings in the United States? Although retirement in the United States means you’re stopping your current work, it does not stop you from finding other ways to make money. Before you retire, you can start a new business or invest in an already existing one to keep earning some income.

However, raising capital for a business can be challenging especially when you’re starting the business as a new one. If you don’t have enough starting capital, there are different funding options you can explore, such as loans, personal savings, etc.

But you can also fund your new business with your retirement savings via a program known as ROBS. Here, you will learn about ROBS and how you can use it to fund your business.

What is a ROBS?

ROBS stands for Rollovers as Business Startups. It is an arrangement in the United States that allows new or existing business owners to fund their business from their retirement savings accounts.

The retirement plan for this purpose must be an eligible account as defined by the IRS, such as 401(k) or IRA. The ROBS is a good way to invest money from your retirement plan into your business without incurring taxes or withdrawal penalties.

How to Fund Your Business Using a ROBS

Funding your new business via a ROBS is not a very straightforward process. There are some requirements you must meet and certain procedures you must take. So, you need to understand the process, and below are some guidelines to help you.

  • Create your business as a C Corporation. This business structure allows for shareholders.
  • Create an eligible account such as a 401(k) plan for your new business corporation.
  • Transfer funds from your personal retirement account to your new corporation account.
  • Use the funds you transferred to buy stock in your C corporation. The funds you realize from the stock purchase is the money you invest into your new business.

    ROBS Info Kit

    Get the Info Kit

    Benefits of Funding Your Business Via a ROBS

    No Penalties or Taxes

    Normally, if you withdraw funds from your retirement savings account before you clock 59½ years, you might be subject to early withdrawal penalties and income taxes. With the ROBS process, you get to avoid these charges.

    You Can Avoid Loans

    Loans can provide you handy starting capital, but they also put your business in debt. If your business takes time to start generating profit, you may have to depend on recurring debts and that may keep you struggling. But if you fund via ROBS, you do not have to worry about settling debts.

    You Can Still Contribute to a Retirement Savings Account

    As you run your ROBS-funded business, you still have the opportunity to run a retirement savings account. This will help you save up and secure funds for your retirement.

    Funding Your Business After Retirement

    If you feel the ROBS process is too technical or too risky for you, you can still wait to retire before you start your business. That way, you can access your retirement funds without any special process.

    If this is the option you want to follow, it might be best to step up your savings game for your retirement, having in mind that you need more funds because you want to start a business after retirement.

    Conclusion

    Since you can support your retirement with the proceeds of a new business, it might not be a bad idea to fund the new business from your retirement savings. That’s why a ROBS can be a viable option for you. You can contact a specialist at IRA Financial to help you make the right choices towards funding your business using ROBS.

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