Yes, you read that correctly. I just told you to take out your 401K and use it now instead of 30 years from now. It seems a little risqué, but isn’t life just one risk after another?
I came across a really dope article at RamonSmothers.com that encourages us to be risk takers. Not the “I bet my nest egg in Vegas” type risk takers, but the “I bet on myself” type.
Let’s think about it, shall we. A 401K (or 403K) is another avenue used to put money away for us to access at a later date, an extremely later date. For most of us, that date is a good 30+ years away. If we contribute our max offerings and it is matched by our employers to a certain point, hopefully by the time we retire, we should have a comfortable nest egg.
What happens if the company goes belly up (think Enron)? Or better yet we are miserable at our place of employment? A whopping 70% of Americans hate their jobs (Gallup). That means more than 2/3 of the population will suffer 30+ years at a job only to retire and finally enjoy life? What kind of living is that?
Smothers suggests a totally different life. One that puts you at the forefront of your destiny, encouraging you to live life to the fullest… and withdrawing your 401K. In the interesting piece, he details his plan and thought process. He even gives you tips on ways to get your money without penalties.
[ …Is your 401k 30 years from now, really what you should be banking on for retirement? Of course, for most, the answer is an undeniable yes. But should it be? What about the others that are not in the “most” category? The non-conformist who wants to start a business but doesn’t have access to all the cash necessary? What if you can use your 401k now, place all bets on yourself, and jumpstart your retirement, instead of waiting to see how much you’ll accumulate in 30 years. I use 30 years as a reference point to illustrate the future. For some, this can be 20 years, 15 years, or even 35 years. The fact remains that it isn’t today! And today is the only thing promised, right? Right?
Let’s rewind to May of 2015. I had just proposed to my now wife on a beautiful beach in Mexico. Had moved back to Houston, closer to my family and friends. And had a good paying job for a very successful company. The only thing negative I could say about the job is that I HATED it.
Simple enough? I wanted my life back, I wanted to control my pay, my time off, and didn’t want to leave my home every 2 weeks to go to an oil rig. So I began looking to start my own business. For the remainder of 2015, this became my sole focus.
I HAD DONE A PRETTY GOOD of saving and had a good amount in my savings account. But of course, like most, it wasn’t fully enough to start a business. I checked my mint app and noticed my 401k looking really good with a substantial amount of cash just waiting to be accessed!
So I did what any rational person would do and looked into ways to access it without paying the tax penalties associated with tapping into it early. If I’m going to invest my 401k funds into something and gamble that they grow with someone else handling them, I’ll take my funds and bet on myself. Every time.
IT DIDN’T TAKE LONG to find a way to do it. The ROBS program was my way out.(more on that later) I was willing to go against the grain. Go against what I’ve been taught to do since an adolescent. Go against the council of some of my most trusted advisors and bet it all on me! I was doing the forbidden, the unthinkable, the unimaginable. I was taking my entire 401k NOW and using it to create the life I want. What an exhilarating move. Don’t you agree?
ONE MINOR STIPULATION associated with the ROBS (Roll-Over for Business Startup) program is that your 401k cannot be in an active retirement account. Meaning that I can’t be actively contributing to my employers’ retirement account when I decide to remove the funds from it and invest it into the business of my choosing. In other words, I had to quit my job and I was totally ok with that.
THE 401k ROLLOVER
THE ROBS PROGRAM forms a C-Corporation that allocates shares of the corporation to the owner. Which would be you. Once your corporation is formed, you’re able to remove the funds from your inactive 401k account, then place those funds into your new corporations’ 401k plan.
You then use those funds to purchase stock in your new corporation’s retirement plan. Once you have the stocks purchased, this cash goes directly to your corporation’s bank account where it can be used to fund the startup. Voila! Like that, you’ve used your 401k to start the business of your dreams! That’s a simplified version of the process as the program is highly complex from a tax standpoint.
There are companies out there that specialize in these rollovers and I wouldn’t recommend doing this yourself. The one I’m working with is Benetrends. They’re helpful and seem really concerned about the long-term success of your startup. You’ll learn more about the process there too. This technique can be used to invest in real estate, and any other venture you’d like to pursue. Did I mention it’s tax and penalty free?
LIKE EVERY OTHER INVESTMENT or business start-up, using your 401k to jumpstart it is risky. It isn’t for the faint of heart and it definitely isn’t for the “play-it-safers”. I read plenty reviews and examples of many people who’d taken their 401k’s to start a business and how it turned out. I noticed one, distinct trend while researching and even talking to people who’d done it. They all had success! They all confirmed that they took the risk and couldn’t be happier that they did.
In contrast, the reviews I came across that warned people not to do it was from… guess who? PEOPLE WHO HAD NEVER DONE IT! All of the sideline spectators that never get into the game. The people who project their fears onto you and warn you of the dangers of something they have never experienced personally! It’s crazy when you think about it. That people can vehemently discredit and negate an option that they have not yet explored themselves! You miss 100% of the shots you don’t take, right? Right?
I’M NOT ADVISING EVERYONE to go out and exhaust your 401k, because like I said it’s not for everybody! I’m just here to pass along info and motivate those that are willing to take the risk, to take it! Bet it on yourself and do what you want to do with it, as opposed to letting it grow with little to no control over it.
I selected a franchise that I would use these funds to open a location with. Then I applied to buy into that franchise, flew out to meet with the CEO of the franchise and was offered to do business with them. In the end, after more research, I decided not to go with that particular brand and elected to keep looking for the right fit for me. When the time comes I’ll pull the trigger and it’s bye bye to my 401k, and hello to the life I want to create. Are you with me?]
I know this seems a bit unorthodox. It contradicts everything we have been conditioned to do. I know this may seem to go against my “save aggressively” talks, but at no time did the above information discourage additional savings. This is specific to your retirement plan.