I keep hearing a radio commercial that recommends people borrow money out of their retirement plans, and use the money to start a business. It goes on to say that after a number of years have gone by, that they take the money that they borrowed from their retirement plans out of the business, and put it back into their retirement plan. The business will be rolling along by itself, and their retirement plan will be made whole again. What a great idea...!
NO, IT'S A TERRIBLE IDEA...!!!First of all, approximately 90% of small start-up businesses fail in five years or less. This is going to make it impossible to put the money that was borrowed from a retirement account back into it, simply because the money is GONE! Additionally, while that money was out of the retirement plan, it didn't have the opportunity to grow with the investments that it got pulled out of. (Yeah, those retirement investments might not have done that well, but they sure beat moving money to a place, where you can expect a 90% chance of losing everything.
http://www.forbes.com/sites/neilpatel/2 ... ut-the-10/(You might need to click on "Continue to site" once it comes up.)
I am going to give you a link to a commercial that isn't exactly what I've heard on the radio, but it's close. (The radio commercial I've listened to never mentioned any risks or possible negatives in their sales presentation.)
This is how the link, I'm about to give you, sales presentation begins:
"Were you laid off over the past couple of years and sick of the job-hunting circus? Have the itch to start up your own business but know there's no chance in hell you're getting a bank loan? Tired of watching your retirement funds whipsaw with the stock market?
If you answered "yes" to these questions – and there are surely a lot of you out there in this economy – you might already be considering tapping into your 401(k) to start a business. And thanks to provisions in the tax code, you can do so without penalty if you follow the right steps."(When someone starts a sentence with the conjunction "And", it should make you wonder about them.)
http://www.inc.com/guides/2010/05/finan ... -401k.html