Refinancing from a 401-K plan

[deguza]

Hello All:

I just posted a question about a business my cousin wants to purchase.

The seller says my cousin can use his 401-K plan to finance the purchase. Here is wht the seller claimes:

- Transfer 401-K plan to a firm that is authorized to invest the funds in small companies.
- Arrange a loan from the 401-K plan to the company.

Has anybody heard of this type of financing? Any companies that can do this?

Thanks,

Deguza

[vangogh]

This isn't my area of expertise by any means, but I'm not sure how much I would trust the seller. The seller's motivation is to get your cousin's money and may not be offering the best advice.

I think it would be best to seek out the advice of a lawyer or accountant.

It wouldn't surprise me if what the seller is saying is true. I'm just not sure how much to trust him since his best interests aren't necessarily your cousin's best interests.

[deguza]

This isn't my area of expertise by any means, but I'm not sure how much I would trust the seller. The seller's motivation is to get your cousin's money and may not be offering the best advice.

I think it would be best to seek out the advice of a lawyer or accountant.

It wouldn't surprise me if what the seller is saying is true. I'm just not sure how much to trust him since his best interests aren't necessarily your cousin's best interests.

This is not quite a "trust" issue. Making sure that the numbers he is giving me and other due diligence matters will take care of it.

Most of my money is now tied up in a 401 K plan. It would be nice to be able to use that money to make money.

Since I asked the question on this forum I found a few other places on internet that advertise these services. I am hoping to find a reliable one, but then there is this article:

Funding a Start-up - How to Tap an IRA or 401(k) - Small Business - WSJ.com (http://guides.wsj.com/small-business/funding/how-to-tap-an-ira-or-401k-to-help-fund-a-start-up/)

Deguza

[vangogh]

Looks like it is possible then. Like I said this isn't at all my area of expertise. I had noticed that no one else had given and answer and thought by responding I'd move this post up on the new posts lists so maybe someone who did know, but had missed the post would see it.

[huggytree]

ive known people who took a loan from their 401k's for downpayments on houses.

none of them ever paid it back.

i wouldnt touch any retirement account for any reason. almost no one saves nearly enough and to take loans from it sounds crazy

[Evan]

I have heard about this with IRA's, though I'm sure it was possible for any retirement plan. I find that this is quite risky. I'm also not sure of all of the specifics, but it may be limited to a certain type of entity.

Also, keep in mind that it'd be the retirement plan -- not YOU -- entitled to dividends/distributions. You'd be an employee, and could potentially lose your entire retirement savings as a result.

I'd say keep that money set aside, and use other resources. I'd think a line of credit or home equity loan would probably be better as it could be paid off gradually over time with the interest being deductible.

You'll find it tough to take out a loan for retirement.