I was teaching a while back and one of the students told us the story of his small business startup and failure. When he retired he decided that he wanted to start a business. So instead of looking for financing he cashed in all of his 401K and sunk the money into the business. Within a year the business had failed. He was out of retirement money and out of work. In his seventies he had no choice but to go back to work.
This is a tough lesson to learn. We never advise people to cash in their whole life savings or retirement to start a business. The chances of failure are too great and if you lose you could lose everything. In addition there are many financial penalties for withdrawing all your 401 K too soon.
If you know you want to do something like start a business when you retire then start planning and saving for that business BEFORE you retire. Educate yourself on running a small business while you are still employed. One of the biggest issues we see with small business owners is their lack of knowledge of actually running the business side of the business. Save money to get that business going and build up your personal credit in case you have to borrow. But don’t cash in your 401K to start that business. You may just end up working all of your retirement years instead.
Suzanne Cormier
Executive Director
BizWorks (Small Business Incubator)
Follow Suzanne Cormier on Facebook and
Twitter @BizWorksCenter
No comments:
Post a Comment