Wagering Your Nest Egg

Funding a startup with retirement dollars may seem like a foolproof idea, but it could put your money, and the outfit's value, at risk

Q: I read about something called an "ERSOP" process that claims to help people take money from their pension plans or IRAs without penalty and use it to finance a small business. Is this something that's "too good to be true"?

-- P.S., Boca Raton, Fla.

A:

Get ready for a little alphabet soup. A handful of firms are heavily promoting the Entrepreneur Rollover Stock Ownership Plan (ERSOP) on Web sites. In this process, your current retirement funds are rolled over into an ESOP (a defined-contribution benefit plan) that the firm establishes for your new C-corporation. The ESOP then buys up the stock, thereby funding your new corporation. Firms charge around $800 for the transaction.

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