Start a business with your 401 (k)? Be careful.
This is a route that many experts advise against. “The first thing we tell people is not to dip into their retirement account,” said Elizabeth Islele, Founder and CEO of The Global Institute for Experienced Entrepreneurship. Although Ms Edwards is younger than the entrepreneurs over 50 to whom the institute is dedicated, Ms Isele is wary of any risk to a secure retirement.
“One of the sad statistics is that so few people have retirement savings,” she said. According to the New School’s Retirement Equity Lab, 36% of Americans aged 35 to 54 have no retirement savings. At the time of its launch, Ms. Edwards fell into the category of the 43% who had saved less than $ 10,000. “They are vulnerable,” Ms. Islele added. “Women in particular are in a deplorable position.
Instead of tapping into retirement funds, the institute advises crowdfunding to start a business. “If you put your idea on Kickstarter and no one is willing to invest even a dollar, you know before you spend a lot of time that it might not work,” Ms. Isele said. But if the idea proves popular, raising a few thousand dollars on a crowdfunding platform may be doable.
Noah Damsky, Director of Marina Heritage Advisors in California, which has worked with several potential entrepreneurs considering reducing their ARIs, has not implemented a policy of outright discouragement. “I don’t tell anyone what to do,” he says. Instead, it helps them see blind spots. “I’m going to make projections so that they understand their risk profile. “
Marianne Nolte didn’t need this kind of help when she started Imagine financial services in Fallbrook, California, in 2020.
Ms. Nolte, 55, was already an entrepreneur when she decided to become a Certified Financial Planner. For over two decades, she ran a video production company. “I thrive as a small business owner,” she said. “This is my happy place.” Acting as her parents’ informal financial advisor helped her discover an aptitude for money management. In 2014, she obtained her Certified Financial Planner license. Five years later, after working in a consulting firm to learn the ropes, she was developing a business plan that involved running her IRA