Entrepreneurs Turn 401(k) Into Startup Capital

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February 15, 2010 by Angela Shupe | 0 Comments

When Don Poffenroth was reading through a magazine while on a flight a few years ago, his attention was drawn to a specific article that talked about using 401(k) savings to fund a business startup without penalty. Motivated by that article, Don and a partner decided to do just that, reports USA Today.

“Neither of us was rich,” he says. “We didn’t want to have to sell shares in the company to start with. But we both had long corporate careers, and so our 401(k) plans appealed to us.”

Poffenroth and Kent Fleischmann used their 401(k) savings, a working line of capital from a local bank and additional personal savings to fund Dry Fly Distilling in 2007.

Risking their retirement nest eggs has paid off so far: Dry Fly Distilling has garnered national and international awards, and its products are sold in 19 states and several Canadian provinces. Business doubled last year, Poffenroth says. Their 401(k) funds were converted to company stock as part of the start-up, and the stock value has doubled as the $2 million firm has grown.