Taking money out of retirement funds to purchase cards

Johnny630 · #1 09-12-2022, 11:01 AM

Quote:

Originally Posted by raulus

And once the cards are in the vault, then you can borrow against them to buy more cards!

So not only have you placed 100% of your assets into cards, you've leveraged up to 160% or more...

Isn't it wild!! Feels like a very slippery slope to me. Idk thank God we have smart guys with money who love the cards and are keeping this hobby strong many of whom are on this board :-)

raulus · #2 09-12-2022, 11:04 AM

I guess maybe they follow Michael Saylor, except instead of Bitcoin, they go with cards:

�How do I buy more Bitcoin?� Take all your money. Buy Bitcoin. Then take all your time, figure out how to borrow money to buy more Bitcoin, then take all your time and figure out what you can sell to buy Bitcoin.� - Michael Saylor

x2drich2000 · #3 09-12-2022, 11:17 AM

I don't think enough info is provided. What type of retirement account are they withdrawing funds from? What are the ages? Withdrawing from a 401k is much different than withdrawing from a Roth IRA same as withdrawing before age 59 1/2 is a lot different than withdrawing after age 59 1/2. That information will have drastically different issues with taxes and penalties on the withdrawal. As I understand the rules, personally I might consider it from a Roth IRA, but wouldn't even think about it from a 401k.

Johnny630 · #4 09-12-2022, 11:19 AM

You could take out what you put into your Roth Accounts Before 59 and a half without any penalty, just not your gains.

x2drich2000 · #5 09-12-2022, 11:21 AM

Quote:

Originally Posted by Johnny630

You could take out what you put into your Roth Accounts Before 59 and a half without any penalty, just not your gains.

Exactly my point. Withdrawing from a 401k you'll get rocked on the penalties and taxes, but a Roth you're not going to have the same expenses taking out your contributions.

Johnny630 · #6 09-12-2022, 11:24 AM

Quote:

Originally Posted by x2drich2000

Exactly my point. Withdrawing from a 401k you'll get rocked on the penalties and taxes, but a Roth you're not going to have the same expenses taking out your contributions.

Yes sir. A tradition Ira or 401k withdrawal prior would be Tax Hit City.

Idk people are Addicted to Cards and the Possibility of Making Major Gains now so I can see where they�re gonna get tempted and do it. Idk 🤷*♂️ nothing wrong with it. It�s their money, I guess smoke it if you want to.

Leon · #7 09-12-2022, 11:24 AM

Quote:

Originally Posted by x2drich2000

I don't think enough info is provided. What type of retirement account are they withdrawing funds from? What are the ages? Withdrawing from a 401k is much different than withdrawing from a Roth IRA same as withdrawing before age 59 1/2 is a lot different than withdrawing after age 59 1/2. That information will have drastically different issues with taxes and penalties on the withdrawal. As I understand the rules, personally I might consider it from a Roth IRA, but wouldn't even think about it from a 401k.

Good thoughts, DJ.
First of all, I haven't gotten into debt over cards. I might extend a payment for a short period, but that's it. And that is because I didn't want to take money from retirement accounts. And I am still not going to do it BUT .....

...As devil's advocate. What is the difference from taking it from one account or the other AS LONG as you account for the tax implications. Let's say I want to buy a 35k card out of my 401k. Whenever I take it out, now or later, it's going to be taxed. IF I account for that, and take 50k? out, to pay the taxes, what's the difference?

(and I have both IRA and ROTHs). I just turned 61 (dang I am old).

Republicaninmass · #8 09-12-2022, 11:32 AM

I believe you can withdraw without penalty from a traditional 401k without penalty if you replace it within 90 days.

So many kids over on blowout using credit cards to buy modern boxes from panini, grade the cards on their credit card, just to flip and pay the card off before interest accrues. A dangerous game of hot potato.

But cards only go up

Peter_Spaeth · #9 09-12-2022, 11:35 AM

And stocks can only go up too.

DHogan · #10 09-12-2022, 11:48 AM

Medical bills for my wife took all of our savings.

Republicaninmass · #11 09-12-2022, 12:04 PM

Quote:

Originally Posted by Peter_Spaeth

And stocks can only go up too.

Exactly the same sentiment. It's scary. Many factors also resemble the housing boom that led to the financial crisis.

x2drich2000 · #12 09-12-2022, 11:49 AM

Quote:

Originally Posted by Republicaninmass

I believe you can withdraw without penalty from a traditional 401k without penalty if you replace it within 90 days.

So many kids over on blowout using credit cards to buy modern boxes from panini, grade the cards on their credit card, just to flip and pay the card off before interest accrues. A dangerous game of hot potato.

But cards only go up

Assuming you're right about replacing the money in 90 days, that's still a dangerous game. Come day 91 Uncle Sam isn't going to care what you were doing with that money.

However, this does touch on another point to consider. As I understand it, once you take money out of the retirement fund, you're going to struggle to put it back in down the road. In the Roth example, if you withdraw the contributions, you can't put those back in later. You can make new contributions, but you're still limited to the yearly maximum and can't go over it. So in 1, 5, 10 years, when cards are no longer a "good" investment, you're stuck with those funds being outside the retirement umbrella.

Johnny630 · #13 09-12-2022, 11:54 AM

I had a chance 3 years ago, late 2019 to buy a SGC 6.5 311 Mickey Mantle for $82,000 Cash. It was beautiful but had a little toning/browning of the borders. I could have done it with my ROTH Def Comp but didn�t do. It�s all good I missed it, 100% looking back it would have been very smart but hey you win some you lose some. Tomorrow is another day to learn and be productive :-)

raulus · #14 09-12-2022, 11:49 AM

Quote:

Originally Posted by Leon

Good thoughts, DJ.
...As devil's advocate. What is the difference from taking it from one account or the other AS LONG as you account for the tax implications. Let's say I want to buy a 35k card out of my 401k. Whenever I take it out, now or later, it's going to be taxed. IF I account for that, and take 50k? out, to pay the taxes, what's the difference?

(and I have both IRA and ROTHs). I just turned 61 (dang I am old).

First, congrats on reaching 61, Leon.

Second, while the tax penalties are important, don't miss the forest for the trees here. The major point that this discussion is missing is that once you withdraw funds from a retirement account, you can never put them back in. There are very low annual limits that limit the amount that you can contribute to your tax-advantaged retirement accounts. If you start pulling cash out, then your ability to put it back into those accounts is very limited. And for those of us with a short runway between now and retirement, your ability to replace those funds is even more limited.

The ability to bank tax-deferred (or tax-free in the case of a Roth) growth in a retirement account for multiple decades is one of the easiest and low-risk financial layups in our country.

For most Americans, we already are woefully short (financially speaking) when it comes to preparing for retirement. For Americans in their 50s, the median account balance is ~$60k. If you've got $60k in your retirement account and you're in your 50s, I can guarantee you that pulling those funds to buy cards is going to leave you waaaaaaaaay short for retirement.

Let's say you pull $50k out of your Roth today, instead of leaving it in the account for the next 30 years before you need it. If it grows on average at 7% per year (which is not an unreasonable assumption), at the end of 30 years, you've got $380k, all of which is tax free. If it grows at 8%, then you're talking $500k.

Even for someone like Leon who just turned 61, the odds are good that you will live to be 80 or 90, so you may very well be keeping some portion of your retirement account invested for the next 20+ years.

Don't just focus on the tax penalties, because that's a total and complete red herring in this discussion. Remember that there's a lot more involved than just what happens today, because making this decision today could dramatically affect your financial health once you to reach retirement.

Fuddjcal · #15 09-13-2022, 09:28 PM

Quote:

Originally Posted by raulus

First, congrats on reaching 61, Leon.

Second, while the tax penalties are important, don't miss the forest for the trees here. The major point that this discussion is missing is that once you withdraw funds from a retirement account, you can never put them back in. There are very low annual limits that limit the amount that you can contribute to your tax-advantaged retirement accounts. If you start pulling cash out, then your ability to put it back into those accounts is very limited. And for those of us with a short runway between now and retirement, your ability to replace those funds is even more limited.

The ability to bank tax-deferred (or tax-free in the case of a Roth) growth in a retirement account for multiple decades is one of the easiest and low-risk financial layups in our country.

For most Americans, we already are woefully short (financially speaking) when it comes to preparing for retirement. For Americans in their 50s, the median account balance is ~$60k. If you've got $60k in your retirement account and you're in your 50s, I can guarantee you that pulling those funds to buy cards is going to leave you waaaaaaaaay short for retirement.

Let's say you pull $50k out of your Roth today, instead of leaving it in the account for the next 30 years before you need it. If it grows on average at 7% per year (which is not an unreasonable assumption), at the end of 30 years, you've got $380k, all of which is tax free. If it grows at 8%, then you're talking $500k.

Even for someone like Leon who just turned 61, the odds are good that you will live to be 80 or 90, so you may very well be keeping some portion of your retirement account invested for the next 20+ years.

Don't just focus on the tax penalties, because that's a total and complete red herring in this discussion. Remember that there's a lot more involved than just what happens today, because making this decision today could dramatically affect your financial health once you to reach retirement.

And I don't want to end up eating cat food and cardboard when and if I make it to 80. Thanks for the sage advice.

rats60 · #16 09-14-2022, 06:24 AM

Quote:

Originally Posted by Fuddjcal

And I don't want to end up eating cat food and cardboard when and if I make it to 80. Thanks for the sage advice.

If you had invested 50k in a 1952 Topps Mantle 31 years ago, you could have 12 million dollars today. If your are happy with 10x in 30 years instead of 200x or more, that is your choice. I think retirement with ~10 million would be a lot more enjoyable than one with 500k.

Casey2296 · #17 09-12-2022, 12:29 PM

Quote:

Originally Posted by Leon

Good thoughts, DJ.
First of all, I haven't gotten into debt over cards. I might extend a payment for a short period, but that's it. And that is because I didn't want to take money from retirement accounts. And I am still not going to do it BUT .....

...As devil's advocate. What is the difference from taking it from one account or the other AS LONG as you account for the tax implications. Let's say I want to buy a 35k card out of my 401k. Whenever I take it out, now or later, it's going to be taxed. IF I account for that, and take 50k? out, to pay the taxes, what's the difference?

(and I have both IRA and ROTHs). I just turned 61 (dang I am old).

In many cases you can get a loan against your 401K and pay yourself back with the interest going to you. Not that I'm advocating that to buy sports cards.

raulus · #18 09-12-2022, 12:36 PM

Quote:

Originally Posted by Casey2296

In many cases you can get a loan against your 401K and pay yourself back with the interest going to you. Not that I'm advocating that to buy sports cards.

Yes, you can take a loan, but...

You have to pay it back within 5 years in substantially equal payments at least quarterly.

And there are pretty low limits to the amount that you can borrow. Basically the max you're going to get is $50k, and the limit could be lower for a lot of people. It's not nothing, but you're not going to buy many 52T Mantles with it.

Needless to say, there's not much of a long-term hold strategy here.

I guess if you're extra enterprising, you can put the card into the vault and borrow from the vault and use that to repay your retirement account loan. Or even better, use the vault loan to buy more cards!

Casey2296 · #19 09-12-2022, 12:49 PM

Quote:

Originally Posted by raulus

Yes, you can take a loan, but...

You have to pay it back within 5 years in substantially equal payments at least quarterly.

And there are pretty low limits to the amount that you can borrow. Basically the max you're going to get is $50k, and the limit could be lower for a lot of people. It's not nothing, but you're not going to buy many 52T Mantles with it.

Needless to say, there's not much of a long-term hold strategy here.

I guess if you're extra enterprising, you can put the card into the vault and borrow from the vault and use that to repay your retirement account loan. Or even better, use the vault loan to buy more cards!

I was using Leons 35K example, it would get you a 1914 CJ Cobb if you want one and you're not paying interest to anybody but yourself. If you think the Cobb is worth more in 5 years than it is now and will appreciate at a faster clip than you 401K investments then it might pencil out. If you have $400K in your 401K and you want 9% of your assets in sports cards and you wanna take a gamble then it might make sense. And that's a big might.

oldjudge · #20 09-12-2022, 01:40 PM

Quote:

Originally Posted by Leon

Good thoughts, DJ.
First of all, I haven't gotten into debt over cards. I might extend a payment for a short period, but that's it. And that is because I didn't want to take money from retirement accounts. And I am still not going to do it BUT .....

...As devil's advocate. What is the difference from taking it from one account or the other AS LONG as you account for the tax implications. Let's say I want to buy a 35k card out of my 401k. Whenever I take it out, now or later, it's going to be taxed. IF I account for that, and take 50k? out, to pay the taxes, what's the difference?

(and I have both IRA and ROTHs). I just turned 61 (dang I am old).

The answer is different for different people but for some they will be in a lower tax bracket when they retire. Thus, the t (tax rate) is not the same in both cases. Secondly, by withdrawing early you loose the compounding in the money. That said, the compounding on the card might exceed that on the retirement account investment (or it might not). The other thing to consider is that the transaction fees for buying and selling cards, if done via the auction route, are much higher than fees in the equity markets.

Lorewalker · #21 09-12-2022, 01:52 PM

I have made it a practice to not take funds that are earmarked for any purpose to use them for another. I have never borrowed formally or informally to fund a card purchase. As I have done with everything in my life, if I want it and have the money for it, I go get it. Plain and simple.

As Leon stated, my cards too are part of my retirement. Until such time as cards become an asset class that are regulated, I would question anyone's judgment who withdraws from a retirement account to fund a card purchase unless it is as a loan and they are as sure as they can be that it can be paid back in the time stipulated.

I have done as well with cards as I have with real estate, over the years but I would never suggest to someone that cards are a better investment vehicle for appreciation than stocks, real estate, etc.

raulus · #22 09-12-2022, 02:02 PM

Quote:

Originally Posted by oldjudge

The answer is different for different people but for some they will be in a lower tax bracket when they retire. Thus, the t (tax rate) is not the same in both cases. Secondly, by withdrawing early you loose the compounding in the money. That said, the compounding on the card might exceed that on the retirement account investment (or it might not). The other thing to consider is that the transaction fees for buying and selling cards, if done via the auction route, are much higher than fees in the equity markets.

[Updated a bit because I realized some of my math was off...]

Good point about the added friction of selling costs.

I think when you factor in selling costs and taxes, you’re going to end up with a lot less than you expected.

Let’s say I buy a 311 mantle for $500k, and in 10 years it goes up to a cool $1M (with the juice). How much do I get to keep after auction fees? If it sells for $833k before the juice ($1M including the juice), the auction house keeps the bidder's premium, and I get charged 5% listing fee, then that leaves $791k.

Now I have a taxable gain of $291. I’m going to pay 31% to the feds for income tax (including my Obamacare investment taxes), plus let’s say I’m in a middling state with about a 4% tax rate. All-in, I’m at 35% for taxes. So I pay about $102k to the government, leaving me with $689.

I net about $189k, which isn’t bad, but probably a lot less than what you were expecting by my card going up by $500k.

MR RAREBACK · #23 09-12-2022, 02:11 PM

If you think it’s going to only double in value in 10 years your better off with the s&p 500

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
Money and Cards	jingram058	Net54baseball Vintage (WWII & Older) Baseball Cards & New Member Introductions	13	08-01-2022 03:06 PM
Ebay's "Money Back Guarantee" vs "Purchase Protection Program"	cardsagain74	Net54baseball Vintage (WWII & Older) Baseball Cards & New Member Introductions	0	08-13-2021 09:11 PM
PayPal hold on funds?	kmac32	Net54baseball Vintage (WWII & Older) Baseball Cards & New Member Introductions	33	02-28-2013 08:35 PM
Quite a few cards for sale in June....prices lowered on all cards & NOW TAKING OFFERS	Archive	Pre-WWII cards (E, D, M, etc..) B/S/T	12	06-11-2008 11:32 PM
T206 Lot For Sale - NOW TAKING OFFERS FOR INDIVIDUAL CARDS OR GROUPS OF CARDS!	Archive	Tobacco (T) cards, except T206 B/S/T	11	02-16-2006 12:59 PM