Have you ever dreamed of starting your own business but didn’t know how to get the necessary funding? What if I told you that you could use your 401(k) funds to do just that—without facing early withdrawal penalties or taxes? It’s possible with the ROBS (Rollover Business Start-Ups) strategy.
ROBS is a little-known method that allows you to roll over your retirement funds into your own business, giving you the chance to become your own boss while keeping your retirement intact. Here’s a breakdown of how it works and why it could be a game-changer for aspiring entrepreneurs.
What is ROBS?
ROBS allows you to use your existing 401(k) funds to finance your business venture by setting up a C corporation. Instead of taking a taxable distribution from your retirement savings, you roll over the funds into a new 401(k) plan tied to your business. This lets you invest in your own company while keeping your retirement savings working for you.
How Does It Work?
Here are the key steps to implementing a ROBS strategy:
- Start a C Corporation (C Corp): To take advantage of the ROBS strategy, you must form a C corp. This is a requirement as other business entities like LLCs or S corporations do not qualify.
- You Must Be a W-2 Employee: As the owner, you need to be an active participant in the business. This means being employed by your own company and receiving a salary as a W-2 employee.
- Set Up a New 401(k) Plan: Once your C corp is established, you will need to set up a new 401(k) plan for your business. The retirement funds you roll over will be invested in your company through this new plan.
- Ownership Structure: Ensure that 98% of your business’s shares are owned by your retirement fund, while the remaining 2% is owned by you or a partner personally. This ensures the proper balance between your personal and retirement investments.
- Dividends and Tax-Free Growth: The best part of the ROBS strategy is that any dividends paid out by the company can be reinvested into your retirement fund. If you use a Roth IRA, you could enjoy tax-free growth on these earnings!
Is ROBS Right for You?
ROBS is an excellent option for entrepreneurs who have significant funds in their 401(k) and want to start a business without incurring penalties. However, it’s essential to understand the rules and requirements to ensure compliance and long-term success.
If you’re considering starting a business with your retirement funds, be sure to watch my detailed YouTube video, where I walk you through the entire process:
Ready to Explore the ROBS Strategy for Your Business?
I’m here to help you understand if this approach is right for you. Book a free discovery call with me today, and we can discuss your goals and how ROBS could fit into your business strategy.
By using the ROBS strategy, you can take control of your retirement funds and turn your business dream into reality—all while growing your retirement savings at the same time!
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