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Can I use 401(k) savings to start my own business?
By Janice Revell, FORTUNE

Making career moves
FORTUNE
NEW YORK (FORTUNE) - In a previous column, you wrote that someone planning to start his own business could use his retirement savings to fund it, as long as he first rolled the savings into a self-directed IRA. If I set up a one-person 401(k), can I use that money to fund my new business? — Barry L.

Yes, you'll be able to tap those funds—at least temporarily. First a quick primer on the one-person 401(k): As with ordinary 401(k) plans, the one-person 401(k) allows small-business owners to invest a portion of their income on a pretax basis, and those contributions grow tax-deferred. But you can stash away much more: For 2005, you can put aside as much as 100% of your first $14,000 of income, plus an additional 25% of your total compensation, to a maximum of $42,000 (or $46,000 if you're 50 or older.)

The one-person 401(k) also offers loan privileges, says Eric Park, a financial planner with Steamboat Financial Group of Washington, Mo. So if you're starting a new business, you can roll over funds from your old employer's 401(k) into your one-person 401(k) and then borrow money from the plan. Of course, you'll have to repay the loan (with interest) to your plan, usually within five years. But, as Park points out, you won't pay any taxes or withdrawal penalties on the amount you borrowed. Under current regulations, you can borrow up to 50% of the assets in your solo 401(k) or $50,000, whichever is less.  Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.