Taking money out of retirement funds to purchase cards

[raulus]

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]

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]

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.

[Snapolit1]

Easy to pick the one card or one stock that has gone up ridiculously to make an argument for an entire class of assets. I am sure many people have bought individual cards for $50,000 and they cratered. Same with stocks. For every 52 Mantle and Amazon there are many many under performers or simply ordinary performers.

[Brian Van Horn]

"Taking money out of retirement funds to purchase cards"

Please don't.

[Johnny630]

People will do whatever they have to do to own a 52 Mantle. The luster of this has never been stronger. It has a cult-like following that has Zero ends in sight. I’ve had several collectors I’ve known who own this card tell me that they would rather live under a bridge than part with this card. Now that's God’s Honest Truth tell me how I’m wrong on this.

[Exhibitman]

Originally Posted by Johnny630

People will do whatever they have to do to own a 52 Mantle. The luster of this has never been stronger. It has a cult-like following that has Zero ends in sight. I’ve had several collectors I’ve known who own this card tell me that they would rather live under a bridge than part with this card. Now that's God’s Honest Truth tell me how I’m wrong on this.

I wouldn't go that far but consider this objectively: you can purchase an asset that has a 40+ year track record of price increases well above inflation. Which is more reasonable, to assume that the price of the item will shift downward over the next ten years, or to assume that the price will increase over the next ten years? I'd go with the former. I know that past performance is no indicator of future performance, but a track record is all we have to go with when it comes to hard asset investments.

I bought a lot of cards a long time ago not because I thought they were good investments but because I enjoyed them. The fact that they are turning out to have been a good investment too is a bonus. Confronting today's prices, there are not many cards I would buy, but the 1952 Topps Mantle is one of them, because of all the factors we have been over ad nauseum on this board. Name a single postwar card with comparable recognition and status of the Mantle. Not possible. The interest in the card transcends collectors. Non collectors are impressed with it, same as a T206 Wagner. That tells me all I need to know about the long-term prospects for the card. There are likely to be short term corrections, as with any asset, but the market trend is upwards over the long term.

And cards are really fun to own, damnit!

Thread needs a card image

[raulus]

Originally Posted by rats60

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.

Here’s the thing- after taxes and auction fees, that seller only netted about $6M.

Basically half of the $12M+ that it sold for.

The taxes and auction fees will eat so much of your financial returns that if this is your approach to retirement, your returns will have to be astronomical to overcome those financial drags.

[ullmandds]

Originally Posted by raulus

Here’s the thing- after taxes and auction fees, that seller only netted about $6M.

Basically half of the $12M+ that it sold for.

The taxes and auction fees will eat so much of your financial returns that if this is your approach to retirement, your returns will have to be astronomical to overcome those financial drags.

No way in hell the consigner paid auction fees on this

[raulus]

Originally Posted by ullmandds

No way in hell the consigner paid auction fees on this

What about the juice? Do you think the consignor kept the bidder’s 20% premium?

[ullmandds]

Originally Posted by raulus

What about the juice? Do you think the consignor kept the bidder’s 20% premium?

I would imagine the consignor got part of that