Source: ezinearticles.com
Where do you see yourself upon retiring? Do you intend to spend some quality time with your grandchildren? Or would like to be the head of your own business? If the latter appeals to you, that's not surprising. The American Association of Retired Persons said that 70 percent of retirees want to continue working and be their own boss. Many cherish the idea of self-employment.
According to the National Academy on an Aging Society, many retirees actually stay active after retirement age. The Academy found that, "61 percent of individuals aged 60 - 69 work full time, and 72 percent of people aged 70 plus work part-time." Individuals in this age bracket have a wealth of lifetime experiences and generally good business acumen. They tend to be more risk averse and this lends to their success in taking on a business venture or starting up their own business. And during an economic downturn, retirees also find it more difficult to be hired as they compete against younger workers. This combination of factors makes it more appealing for some to invest some of their retirement funds into a small business start-up. It's also just plain smart because the return on their investment could accentuate their already set aside income stream.
Funding your own business with your retirement fund is a logical move considering that bank loans and other sources of capital are hard to obtain these days. You can borrow up to 50 percent of the amount. In addition to putting up your own business, the money can be used to raise capital for an existing business, buy an existing business or purchase a franchise. It is available to anyone with an existing retirement fund, income tax bracket, and can greatly help those who have retired early or have suddenly lost work due to downsizing and closures.
Borrowing money against your retirement account will also require you to pay back the interest. Most payback periods are fairly short and the interest rates are usually competitive. Expect to pay at a rate of prime plus two percent. Anything higher is not considered competitive or within market rates. The reasoning behind this is to allow you to repay the loan without losing the capital acquired.
You should also be aware that any money you borrow is not protected from taxes as long as it remains outstanding. Any growth on that cash will be subject to your applicable tax bracket. The sooner you pay it back, the sooner you will be able to benefit from its growth tax free.
To make the most out of your retirement fund, don't blow it all up in one transaction. You could lose all your money that way if the business fails. Borrow money intelligently and keep some for emergencies. Lastly, consult a reliable firm for sound advice on how to invest your retirement fund.
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