Obviously lots of reasons not to do this with 100% of your retirement, but it's possible you have a relatively overfunded 401k (unlikely) vs. other assets (possible). Or maybe you have rich parents who will cover your retirement, so your 401k is just a tax shelter.
There's actually some crazy stuff you can do with a large enough 401k to use it to fund a business startup -- it's called a "Rollover as Business Startup (ROBS)". Essentially you open a new 401k plan for a new business, roll over your old 401k balance to the new plan, and have the new plan buy stock in the employer (i.e. the new company), financing it. Essentially you can get your ownership of a startup into a 401k, a huge tax savings (and complete tax savings if it is a Roth 401k). This also avoids the early distribution penalty and income tax on the 401k balance.
There are lots of issues setting it up (the IRS hates it, many of the people promoting it are scammers, so basically if there are any paperwork deficiencies in the plan, you're screwed), but it has worked, and is technically legal. It requires $50-100k 401k balance to be generally worthwhile, and is mainly used by small business or franchise people who can't otherwise get financing, but is an option.
There's actually some crazy stuff you can do with a large enough 401k to use it to fund a business startup -- it's called a "Rollover as Business Startup (ROBS)". Essentially you open a new 401k plan for a new business, roll over your old 401k balance to the new plan, and have the new plan buy stock in the employer (i.e. the new company), financing it. Essentially you can get your ownership of a startup into a 401k, a huge tax savings (and complete tax savings if it is a Roth 401k). This also avoids the early distribution penalty and income tax on the 401k balance.
There are lots of issues setting it up (the IRS hates it, many of the people promoting it are scammers, so basically if there are any paperwork deficiencies in the plan, you're screwed), but it has worked, and is technically legal. It requires $50-100k 401k balance to be generally worthwhile, and is mainly used by small business or franchise people who can't otherwise get financing, but is an option.