Anybody Cash out early, pay penalties and start their own business?

[vicmost]

This is "Young Dreamers" forum I'm growing tired of the rat race!

[mickj]

guess not

[kat]

Did you, like me , have a beer before posting?

All those things don't follow. I started my own business, self-employed, and never had an experience I could name as a penalty or a cash out. If your experience is real different , just call it something else, and do what you want to do. This life is not a dress rehearsal. And besides, you can always say this own business thing is not what I want after you try it. My guess is you have a pension chain, no? If it's a government, you can probably opt back in. (I can.)

[Martha]

I think he is talking about cashing in his 401k and paying the tax and early withdrawal penalties.

Don't do it.

If you want to start a business, find, figure out a way to do so without losing your 401k.

[Jay_Gatsby]

Quote:

Originally Posted by Martha I think he is talking about cashing in his 401k and paying the tax and early withdrawal penalties. Don't do it.* If you want to start a business, find, figure out a way to do so without losing your 401k.*

Exactly. Perhaps you should follow the common advice "if you can't pay cash, you can't afford it". In repeating this often-said adage, I mean to emphasize that you should work at your "day job" until you have: (a) enough cash to cover one year of your normal living expenses, (b) enough cash to get your company to cash positive territory, and (c) health insurance from some other source.

Don't be in such a hurry to ditch your day job (the "rat race" as you refer to it) until you have a solid plan of action and the means to carry it out.

[HFWR]

Probably the #1 reason small businesses fail is lack of reserves to operate until cash flow positive...

[Arif]

Quote:

Exactly. Perhaps you should follow the common advice "if you can't pay cash, you can't afford it". In repeating this often-said adage, I mean to emphasize that you should work at your "day job" until you have: (a) enough cash to cover one year of your normal living expenses, (b) enough cash to get your company to cash positive territory, and (c) health insurance from some other source.

We started our business on the side until it got big enough for us to live off the income. At that point we left the service and went into real estate full time. prior to leaving our jobs we saved and invested one years worth of living expenses, paid off the car and moved to Panama. I plan to fly back about 4 times a year to take care of business and the rest of the time online looking for properties to invest in. Not a bad life and sometimes I wonder if I am the only person community from one country to another to work?

[tryan]

Quote:

I think he is talking about cashing in his 401k and paying the tax and early withdrawal penalties. Don't do it. If you want to start a business, find, figure out a way to do so without losing your 401k.

I borrowed from the 401k and bought a couple properties at auction in the early 90's. Have to keep the day job to make the loan payments - to yourself.

Worked out great as the properties have returned many times more than the 401k has/would-have. Paid the loans off before I FIRE'd. All is well.

Paying the penalty and taxes - cashing out - never crossed my mind.

[retire@40]

Quote:

Originally Posted by Martha I think he is talking about cashing in his 401k and paying the tax and early withdrawal penalties. Don't do it.* If you want to start a business, find, figure out a way to do so without losing your 401k.*

Ditto. I was about to write the exact same thing.

[haha]

Quote:

Originally Posted by Arif We started our business on the side until it got big enough for us to live off the income. At that point we left the service and went into real estate full time. prior to leaving our jobs we saved and invested one years worth of living expenses, paid off the car and moved to Panama. I plan to fly back about 4 times a year to take care of business and the rest of the time online looking for properties to invest in. Not a bad life and sometimes I wonder if I am the only person community from one country to another to work?

That you could give up this much to local competitors and still do well kind of amazes me. People in real estate may not be geniuses, but they aren't stupid. I would expect the local operators to get anything good that showed up. And also for your expenses to be quite high- it isn't easy to manage something from that extreme distance.

Ha

[Arif]

Quote:

That you could give up this much to local competitors and still do well kind of amazes me. People in real estate may not be geniuses, but they aren't stupid. I would expect the local operators to get anything good that showed up. And also for your expenses to be quite high- it isn't easy to manage something from that extreme distance.

You would think but that hasn't been the case. When I was local I found properties the same way I do now..on the internet. Everything is online, comparables, MLS listings, you name it. I use the same realtors, contractors, and overall system as I did when I was there. We buy 2-3 homes on each trip so the costs are spread out. It works for us.