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Comment by indymike | Hacker News Reader

This effectively bans you from making a retirement investment in yourself - and takes a great deal of money off the table for innovation. So many companies are seeded with capital of a person putting 401K money into their own company. The retirement fund and the home are really what most people have to use to create businesses. Frankly, this sets the US back 250 years, and bars the middle class from starting businesses.

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The traditional IRA and 401k were introduced in 1974, the Roth IRA in 1997. They were never intended for rich or poor people to speculate in risky one-off investments. How does this rule set the US back 250 years?

https://en.wikipedia.org/wiki/401(k)#History : "Congress [... enacted the ...] Internal Revenue Code Section 401(k) as part of the Revenue Act.[8] This occurred on November 6, 1978."

It doesn't ban anything at all.

It just refuses to give you a tax break when you do it.

This is an effective deterrent, and would likely be enforced with a tax penalty. edit: By not allowing me to have the tax benefit, you effectively reduce the incentive to invest in my own business. This seems like a law that is aimed at fat cats that will miss, largely because fat cats aren't going to be investing out of their own retirement. On the other had, my neighbor just used $80K of his 401K to buy three vans for a new HVAC repair company. Had that been taxed, he would have had enough for one, maybe two vans, and been on a much worse cash flow trajectory.

Deterrent from what, starting a business?

Your theory is that for 250 years America's entrepreneur class has been primarily driven by raiding their own tax-advantaged retirement accounts?

Also if your neighbor story is for real what happened there is he took a loan against his retirement account or did some kind of ROBS transaction. It's already illegal for him to interact with plan assets as part of a self-directed IRA, so he didn't use one to invest in his own business and buy vehicles. Hence this story has nothing to do with the topic at hand.

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