A lack of jobs in today’s economy is prompting more people to use their retirement money to start small businesses, according to Adam Bergman, a lawyer and tax expert.

Although it can be a risky proposition, it is one way 401(k) and IRA funds can be used to provide employment for a person who is retired or nearing retirement and for some of their family members, says Bergman, a senior tax attorney with IRA Financial Group LLC in New York City and Miami.

“A lot of people are cash poor but retirement rich, so this is a way to use those retirement funds if they have to,” he says.

The IRS allows 401(k) or IRA funds to be rolled over to a new 401(k) account that can be used start a business or buy a franchise. The money is used to buy qualifying employer securities in the new C Corporation that is set up, Bergman explains.

The owner of the fund is allowed to be actively involved in the business, earn a salary from it and guarantee a business loan. It can also be a way to provide jobs for family members who want to work in a family-owned business, Bergman says.

More people are using the tactic either because they are bored with retirement or cannot find suitable jobs, he says. The strategy, known as a rollover business start-up, or ROBS, does not have the same restrictions as a self-directed IRA when used for a business start-up. Using a self-directed IRA, the account owner cannot take an active role in the business, earn a salary from it or guarantee a business loan.

There are advantages and disadvantages to using a ROBS strategy, says Bergman.

With a ROBS strategy, up to the full amount of the 401(k) can be used for the business without paying taxes on the funds at that time and without paying any withdrawal penalty.

Starting a business provides a way to create a job for the account holder if other job hunting measures have failed.

However, “not everyone has the background and the ability to run a business, so it can be risky,” he says.