Some entrepreneurial Baby Boomers are using their retirement nest eggs to finance or grow a business without incurring taxes or penalties, USA Today reported.

They are using a strategy called rollovers-as-business startups to finance their operations.

“Call it what you want: living your dream, encore careers or just gambling on your future,” the newspaper said.

Under the process, a retirement account is rolled over into a new retirement fund and effectively becomes a shareholder in the new business.

Katherine W. Dean, senior vice president and managing director of wealth management planning at Wells Fargo Wealth Management, said the strategy could be reckless for some.
"There is enormous risk in that. You have to factor that in as well."

But David Nilssen, co-founder and CEO of Guidant Financial, told USA Today the strategy “can be less risky than using traditional financing."

"When will I retire like a normal person? I don't think about that. I'm 54. I love what I do. I think it's a good gig if you're doing something that you love," said Randy Biehl, 54, who left a career as a federal probation and parole officer 13 years ago to start a winery in upstate New York.

Chuck Morris, 63, and his wife Jan Morris, 62, used their nest eggs to become co-owners of The Hardware Distillery in Hoodsport, Wash.

"I know some people think it's weird to start a business at our age," said Jan, a former attorney and teacher. "I'm glad we had the opportunity to use retirement money to start a career that's fulfilling to both of us."

Finance & Commerce reported that in such a scenario, an entrepreneur incorporates a new business, then has that corporation set up as a qualified retirement plan via a profit-sharing fund.

Blogger Barbara Weltman warned it may not be a good idea for people to put all of their nest egg into this type of business. She suggested getting professional advice.

Mike Accurso of The Entrepreneur’s Source warned, “Once you set yourself up as a profit-sharing fund, there’s annual reporting you have to do also.
“If the IRS has any suspicion that you’ve taken your IRA funds and done it in any way incorrectly, they’ll shut down your business,” he told Finance & Commerce.

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