So you want to build your business. You’ve come up with your product, you know exactly how you want to market it and you know exactly who you want to work with. Congratulations! Now, how do you make it happen? As nice as it would be to believe that “money doesn’t make the world go ‘round,” it sure as sugar pays the bills. And you will need heavy investing in your brand-new company in order to get anywhere, unless you’re the heir to an immense fortune.

The most common method of securing funds is through fundraising. It’s a tried and true process that’s essentially synonymous with entrepreneurship. But sometimes you just can’t get anyone to buy in on your vision. And that’s alright. Maybe your product is too early for the current market; or maybe it’s the perfect time, but no one else can see it, and won’t give you a chance.

Regardless of the reasoning, you need money to fund the business, and you need it now. One method of getting your seed money is to cash out your 401(k). It’s an incredibly bold move, and is quite regularly frowned upon by financial professionals, with good reason. For starters, the IRS will impose a 10% fee on early withdrawals (any withdrawal before the age of 59-and-a-half). What’s worse, this penalty fee comes on top of the traditional taxes associated with normal 401(k) withdrawals.

That’s precisely what happened to FIGS co-founder Trina Spear when she founded the healthcare apparel company. In order to fund the company, Spear cashed out her $140,000 401(k); after taxes and fees, including the 10% IRS penalty, she only walked away with $70,000. Spear was very fortunate, having worked on Wall Street for several years and earning a very generous paycheck. She was able to fall back on this money to live off of while the 401(k) money paid for the business.

But not everyone is so fortunate. In fact, most entrepreneurs do not have much money to live off of while starting their business. This is why cashing out your 401(k) is so risky. Add in the fact that your savings can potentially grow exponentially, depending on the economy at the time of your 401(k) withdrawal, it makes early withdrawals seem very dangerous.

Coincidentally, this is not a foreign concept to us at the Opes Group. We’ve actually worked with a few entrepreneurs who’ve considered similar means of funding. And we’ve successfully helped them avoid the 401(k) penalty. If you’re looking to start up your business, and are in need of investors and pragmatic solutions to your financial problems, make sure to visit us at