More and more seniors are choosing to use the money in their retirement accounts to start their own business once they have reached retirement age. Instead of using their money to travel around the country or fund a life of rest and relaxation, they are using the money to create the business that they always wanted to have but was unable to start due to personal or financial obligations. While this may sound like a great idea for any senior that would like to continue working after they reach retirement age, there are some things that they must think about before they make such an important decision.
Understand The Risks
Using the money from your retirement account to fund the creation of a new business is a risky proposition. If your business is not successful, you may lose your business and all of the money that you had saved for retirement, leaving you with little to live on for the rest of your life. The money that is lost in one of these ventures is almost impossible to replace in later years. If investing in the creation of a new company will take a significant percentage of the money in your retirement account, you should explore other funding options or scaling down your plans.
However, using a small portion of your retirement funds to purchase a franchise location of a successful company may be worth the risk. Because the business is already part of an established company, it will already have a customer base that knows about the company and its products. However, some of these franchise agreements require a significantly higher investment over the years than the buyer initially realizes, so it is important to do your research and try to create a true cost estimate before making a decision.
Finding Assistance
There are a number of companies available that specialize in helping seniors fund business opportunities with the money that they have saved over the years for retirement. There are several different funding methods that can be used. One of the most popular methods is the self-directed retirement account option. Using this method, the senior creates the business that they would like to invest in and then invests in the business using the proceeds from their IRA or 401k to buy stock in the company. This allows your new company to be owned and capitalized by the retirement account.