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Self-Invested

Can your retirement savings help solve your financing problems?
March 1, 2006
URL: http://www.entrepreneur.com/article/83512

Gaining access to startup capital is often a huge hurdle. Now many entrepreneurs are turning to companies like BeneTrends Inc., Directed Equity and Equity Trust Co. to get early access to retirement savings--without the normal penalties.

How does it work? Len Fischer, founder of San Diego-based BeneTrends, explains his company's four-step process. First, a C corporation is established for the new business, and a retirement plan is then created under the new C corporation. Next, funds are rolled over from the person's existing retirement plan into the C corporation's new retirement plan. Finally, the new retirement plan purchases stock in the C corporation, leaving the capital in the business owner's hands. This process takes about two to four weeks and costs $4,800 plus state filing fees.

Don Patrick, managing director of Integrated Financial Group, a financial planning firm in
Atlanta, offers the following advice to avoid potential problems with this type of financing: