How to enjoy a more worry-free retirement. My wife and I are retired, have a comfortable income and a substantial nest egg. What can we do to better enjoy the retirement we've worked and saved for?--A.N. The calculator estimates how long your nest egg is likely to last at different withdrawal rates. Another move that might allay some of your anxiety is to turn a portion of your savings into guaranteed income. You and your wife are already getting guaranteed income from Social Security, so you don't want to overdo it and end up with more guaranteed income than you need. But research shows that retirees who receive annuity-like income in retirement tend to be happier than those who don't. The second option is a longevity annuity, which starts making payments at some point in the future. So, for example, if that same 65-year-old couple were to invest $50,000 today in a "joint and survivor" longevity annuity that begins making payments in 15 years, they would collect about $700 a month for life once they hit age 80. But you seem to have done enough saving, investing and planning to put yourself in the position of having a financially secure retirement.
Skip Sheppard took a bet on himself in 2011: The 59-year-old used $200,000 from his retirement accounts to buy a business.
Using a financing option called a Rollover for Business Startups, or a ROBS, he reopened and expanded Three Lantern Marine and Fishing, turning the Gloucester, Massachusetts, fishing supply store with $275,000 in sales into a $3 million business.
“We were very fortunate with the location and the type of business we are in, and the market was rebounding,” Sheppard says.
But not every business will succeed, and a ROBS carries one particularly notable risk: You could jeopardize your retirement. While this type of financing can provide you with money to fund your business, the complex transaction doesn’t make sense for everyone. Here’s what you need to know about the process, including the potential benefits and possible downsides.
How does a ROBS work?
In this type of transaction, funds from eligible retirement accounts, including a 401(k) or a traditional individual retirement account, are rolled over in most cases with the help of an attorney or a ROBS provider and invested in a new business or franchise, or used to buy or put money into an existing business. Here’s what happens.
A C corporation — a corporate structure that allows shareholders — is formed. Then a new 401(k) plan is created for the business.
The owner’s existing retirement accounts are rolled into the new 401(k) plan. Most retirement accounts qualify.
The rolled-over funds are used to purchase company stock in the C corporation. The proceeds from the sale of stock is the cash that’s invested in the business.
It’s an alternative way to finance your business. Lenders typically require strong personal credit, positive cash flow and collateral for loan approval. A Rollover for Business Startups is an option for an entrepreneur who has built up retirement…