
Ask HN: When does it make sense to use a 401K to fund a startup? - nylonstrung
It&#x27;s just been brought to my attention that one can use a structure known as ROBS (Rollover for Business Startup) to invest IRA or 401K money into their own business.<p>Has anyone had experience taking this approach? If I&#x27;m planning on launching a bootstrapped startup in a year does it make sense to max out my 401K now and invest it via ROBS to bypass income tax?
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jotjotzzz
If you lost all your 401K money, you not only lost the money, but you also
lost the TIME that it took for that money to accumulate and grow. In addition,
I would think there would be tax implications for losing that money. I don't
know enough, but this sounds like a very risky and bad idea compared to
getting a bank loan. In addition, your 401K is safe during bankruptcy -- in
case your bank loan goes bad. The approach of using retirement money for a
venture is gambling with your safety net.

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Jeremy1026
It doesn't. Its far too big of a gamble to risk throwing away your retirement.
If you can't finance your start-up with cash on hand then you need to come up
with a way to get cash that doesn't involve 401k's/IRAs

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DrScump
I'm unfamiliar with ROBS, but in the general case, you not only face penalties
for early withdrawal, but it counts as added _regular income_ for tax
purposes.

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nylonstrung
Well the point of ROBS is that neither of those apply as far as I can tell. I
certainly would not take money out were that not the case.

