Twenty-three years ago, I cringed when friends cash out their 401K accounts to get the money to invest in a business of their own. And paid 40% of their life savings to the IRS in taxes and early distribution penalties.
Then, with the help of top pension attorneys and third-party administrators, we put together a tax-deferred “rollover” procedure. Surprisingly no one knew it had been allowed in codified law since the passage of the ERISA Act of 1974!
With this new replacement plan procedure, we had hundreds of our clients who were able to avoid taking taxable “distributions.” That meant they could prevent writing a check for $40,000 to the IRS (on a $100,000 balance in a 401K) and invest that money into their new business!
With the adoption of a Safe Harbor Plans, you are allowed to convert your 401(k) into privately-held stock in your new business with no taxes or penalties due.
For this tax-deferred transfer we create a 501(a) trust and couple it to special “exemption clauses.
In this way, you would not be “cashing out” your 401(k).When you invest these savings into a business, the IRS accepts this as a tax-deferred “rollover” which allows you to keep the 35% to 40% you would have paid in early-distribution taxes and invest that extra money in the business. It’s pretty much a no brainer.
We have helped hundreds of clients over the past two decades get tax-free access to their 401(k), 403(b), 457, and IRA funds to buy or startup their own businesses.
This is a great alternative to borrowing money from a bank since you won’t have to pay back any principal or interest payments.
Below is a comparison between “cashing out” your 401(k) versus “rolling over” these savings on a tax-free basis. As you can see, It’s basically a no brainer.
For additional details please send me an email today to info@safeharborplans.net, or fill out our online contact form with your name, email address, and any questions you may have. We will get back with you on the same day.
| CASH OUT YOUR 4O1K | ROLLOVER INTO A NEW BUSINESS | |
|---|---|---|
| Amount in retirement fund: | $ 100,000 | $ 100,000 |
| Mandatory 20% withholding for taxes: | $ 20,000 | 0 |
| Cash available to withdraw: | $ 80,000 | $ 100,000 |
| Tax consequences of withdrawal: | ||
| Federal income taxes (at 28%) | $ -28,000 | 0 |
| Early distribution penalty (10%) | $ -10,000 | 0 |
| State income taxes (2%) | $ -3,000 | 0 |
| Total taxes & penalties: | $ 41,000 | 0 |
| Compare with the cost to set up a Safe Harbor Plans : | $ 4,950 | |
| Net cash available: | $ 59,000 | $95,050 |
| Percent of retirement funds retained: | 59% | 95% |
| Additional cash without taxes & penalties. | $ 54,050 | |
For over 20 years we have helped hundreds of clients roll money out of their 401k to buy or startup their own business.
Our clients are in all states and have provided a large number of Safe Harbor Plans rollovers in Los Angeles, CA.
When you invest money from your 401K or IRA account to fund a business, you get to keep that 35% you would have paid in early distribution taxes. This type of transaction is considered a tax-free rollover. So for example instead of writing a check to the IRS for $35,000 on a $100,000 401K rollover, you get to keep that extra money to put into your new business.
And there is no bank loan or interest to pay back because you are investing your own money.
When you are ready to help you get funding for your own business using your Safe Harbor Plans rollover plan in Los Angeles, CA.
We go through all of the 401K rollover steps required by law in behalf of each of our clients. Our firm creates the documents and processes the forms. By the way, our fee is 40% lower than what other firms charge.
If you would like to learn more about our Safe Harbor Plans rollover plan, contact us today by emailing dean@401kbusinessfunding.net or filling out our convenient online contact form.
For over 23 years we have helped hundreds of clients roll money out of their 401K or IRA to buy or startup their own business.
We have provided a large number of Safe Harbor Plans rollovers to clients across the United States.
When you invest money from your 401K or IRA account to fund a business, you get to keep that 35-40% you would have paid in early distribution taxes. This type of transaction is considered a tax-free rollover. So for example, instead of writing a check to the IRS for $35,000 on a $100,000 401K rollover, you get to keep that extra money to put into your new business.
And there is no bank loan or interest to pay back because you are investing your own money.
Once you have identified a business you would like to purchase, reach out to us using the contact form below or by scheduling a phone call using the “Request a Free Consultation” button in the upper right corner of our website.
We go through all of the 401K rollover steps required by law on behalf of each of our clients. Our firm creates the documents and processes the forms. By the way, our fee is 40% lower than what other firms charge and we charge nothing until after your new business is funded!
If you would like to learn more about our Safe Harbor Plans rollover plan, contact us today by emailing info@safeharborplans.net or by filling out our convenient online contact form
EXCLUSIVE: In 2003, our firm worked with the Small Business Administration to create “waiver request” documents that would allow our clients to use their 401K for the down payment required to be eligible for an SBA loan.
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