A Fit Small Business reader recently posed an interesting question about funding a ROBS. Can you use a Required Minimum Distribution (RMD) from an IRA to fund a Rollover as Business Startup (ROBS)?

In most cases RMDs start at age 70 1/2. The RMD exists to ensure you use this money for your retirement (that purpose was why the account received tax advantaged status in the first place). Your RMD is typically based on the value of the retirement account and the IRS’s life expectancy chart.

One account that is not subject to RMDs is the ROTH IRA. However, the funds within a ROTH IRA are also not eligible for a ROBS.

The question then, is can I take the money from a retirement account that requires an RMD and use that money to fund a ROBS? Since a ROBS is a tax deferred account, the answer is no. The IRS does not allow RMDs to be rolled over into another tax deferred account.