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Friday Links: Risking Retirement Money

Posted by: John Tozzi on January 15, 2010

Entrepreneurs need to weigh the risks carefully before using retirement savings to fund a business, Eilene Zimmerman reports at CNNMoney.

Health reform could give people who only keep corporate jobs for their insurance a reason to leave to found startups or work with smaller companies, Kristen Gerencher writes at the WSJ.

Indicators on small business credit don’t look good, and the surveys miss businesses that have already failed for lack of credit, according to Menzie Chinn, an economist at the University of Wisconsin, Madison, blogging at Econbrowser.

Reuters blogger Felix Salmon reviews a new paper questioning how much microfinance really helps alleviate poverty.

Reader Comments

Carol Cross

January 16, 2010 12:54 PM

I believe the consensus is that it is almost NEVER a GOOD IDEA to risk your retirement money to start up a small business.

While there may be rare exceptions, the only available statistics in a Google Search seem to suggest a consensus that 50% of small startup businesses fail out of business sometime within the first five years and less than a third of small-business startups survive to ten years.

Remember that the same special interests who pushed the legalization of "borrowing agaist the 40l" are the same interests who are pushing (with a new Bill in the Congress) the use of GI Bill Education cash to finance training to be a franchisee.

While franchisors can sometimes beat the grim odds of failure of startups because they can churn "founding franchisees" who are the principal asset of their businesses, the startup franchisees don't beat these odds. Further, a franchised business is a "wasting asset" because of the finite term of the agreement.

Public policy, like borrowing against your 401 to start a small business completely ignores the grim statistics that must be known to the Committees in the Congress -- but it does help both the BIG Business Franchisors and the startup franchisors.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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