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Greetings, Walkingstock, and welcome. You wrote:

<<In less than 12 months my fiancee (who can retire at 59) and myself (not yet 59) will "retire". We both have a retirement trust, when together is less than 2MM. We were foolish enough several years ago to stay with our blue-chip stock vs. conversion to GIC. Proven to be very foolish over the years.

We need help. Charles Erickson(?) quoted some magic about forming a 401K since we also have an LLC business and a farm. Rolling our stock into the 401K lets us manage the investment....but allows loaning back from the LLC to the farm. Can we really fool around with this?

Am I jestering in the wrong court? Should I just go ahead blindly and take a scheduled distribution? I really need some cash to bring the farm up to a proper operating level.>>


I have no idea who Charles Erickson is, but it sounds as if he is advocating the transfer of funds from your existing 401k plans to one established for the LLC. That's permissible providing you want to go through the hassle of establishing one for that purpose. It also sounds as if the LLC 401k would have a loan provision. If so, that would allow you to borrow 50% of your account value up to a maximum of $50K for whatever purpose you desire. That money must be repaid to the 401k with interest in 5 years. Failure to repay results in a deemed distribution of the loan, which means you will be subject to income tax on the outstanding amount plus a 10% penalty if you are still younger than age 59 1/2. OTOH, if he is suggesting that the LLC "invest" in the farm via a loan or mortgage note repayable with interest, then that will not be allowed. As the owner of both the LLC and the farm, such a loan or "investment" would be considered a prohibited transaction and a violation of your fiduciary responsibilities as the owner of both entities.

Regards..Pixy
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