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Retirees Looking to Use Retirement Funds to Start Family Business for Children

Retirees bored with retirement looking to start new businesses for themselves and their families.

IRA Financial Group, the leading provider of Self-Directed IRA and Solo 401(k) Plans, has seen an increase number of retirees looking to use their retirement funds to start new businesses with family members. “We have heard from a number of retirees who were bored with retirement and were looking to keep busy in retirement while helping their family work in a family business,” stated Adam Bergman, a tax attorney with the IRA Financial Group. According to Mr. Bergman, “a number of retirees have found retirement dull and with the lack of jobs available for their children, have decided to use their retirement funds to start a new business to keep busy while also helping their children with employment opportunities.”

The rollover business start-up (“ROBS”) arrangements typically involves rolling over a prior IRA or 401(k) plan account into a newly established 401(k) plan, which a start-up C Corporation business sponsored, and then investing the rollover 401(k) Plan funds in the stock of the new C Corporation. The funds are then deposited in the C Corporation bank account and are available for use for business purposes. “The ROBS strategy has allowed many retirees the ability to use their retirement funds,” stated Mr. Bergman.

With IRA Financial Group’s ROBS structure, the limitation imposed using a Self-Directed IRA for a business can be sidestepped because the individual retirement account business owner would not be able to be actively involved in the business, earn a salary, or even personally guarantee a business loan. Whereas, if the business owner used a ROBS strategy, that individual would be able to be actively involved in the business, earn a salary, as well as personally guarantee a business loan without triggering the IRS prohibited transaction rules.

In addition, IRA Financial Group’s Solo 401(k) Plan loan feature has been an alternative structure used by many retirees to make investments in an active trade or business. A solo 401k loan is permitted at any time using the accumulated balance of the solo 401k as collateral for the loan. A Solo 401(k) participant can borrow up to either $50,000 or 50% of their account value – whichever is less. This loan has to be repaid over an amortization schedule of 5 years or less with payment frequency no less than quarterly. The interest rate must be set at a reasonable rate of interest – generally interpreted as prime rate + 1%. As of 9/1/13 prime rate is 3.25%, which means participant loans may be set at very reasonable Interest rate. The Solo 401(k) plan is a perfect structure for any retiree seeking immediate funds to start a family business.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of self-directed IRA LLC “checkbook control” solutions. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

For more information on how to use your retirement savings to start a business of your own, contact one of our tax experts today at 800.472.0646.

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Posted in Business Acquisition Solution, IRA Financial Group, Self-Directed IRA, Solo 401(k)