401 (k) Business Financing Detroit MI

Of all the ways you can bootstrap your startup business into existence , the very last one you should consider is digging into your 401(k) or other tax-favored retirement plan. There are good reasons why government tax penalties are so stiff on such withdrawals.

First, drain every other financial asset you own . Beg, plead and borrow from family and friends . Rack up credit-card debt to the stratosphere. Then and only then, if you’ve exhausted every creative business financing option available and you still need funds, consider the one way that you can access your 401(k) both legally and safely: borrow from it. But there are stringent laws covering repayment and how it must be done. If you don’t follow them, you can easily lose enough of your retirement savings to force you to work for the rest of your life.

Beware the negatives of simply withdrawing funds

The one thing you don’t want to do unless it’s your last resort (many financial planners say it should never be done, whatever the circumstances) is just withdraw money straightaway from your 401(k) account. Whatever you take out of your 401(k) is subject to regular income taxes, and if you’re younger than 59-1/2 you’ll fork over an additional 10 percent tax penalty.

“Using those assets is a pretty risky proposition because you’re taking away from your safety net for retirement,” says Tim Swartley, a trust officer at Univest, a bank-holding company based in Souderton, Pa. “All the benefits you’ve accrued by savi...

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