Great points by a lot of people, especially Nicolo/raulus. He's right on the money in regard to the various tax implications. It is definitely nice to have another CPA/taxperson on the forum that gets it, and so I'm not the lone voice talking many times. LOL
As Nicolo already opined, I would also not recommend pulling money out of retirement accounts, be they 401Ks, IRAs, or Roth IRAs, to go out to buy cards as investments. The tax costs and potential hits to retirement savings can be brutal. Granted, the Rosen/Mantle example is an out of the park home run example of how a card investment would well be worth it, but for every potential deal/investment like that, how many more are there that don't even come close, or could end up in a losing situation? Just think back to the junk wax era, and a possible repeat with all these modern collectors of the shiny new stuff.
But as another poster also mentioned, you have to look at each individual person's own unique situation and tax/retirement position before making such a decision also, along with their age, states/cities they get taxed in, and a myriad of other factors. Still, I would not think it makes sense to ever pull money from any type of retirement account just to buy a card. For many of us, myself included, I did not buy cards with the initial intention of looking at them as retirement assets. I figured it was a hobby, and if one day I could basically get back out of it what I had put in, I would be happy, As we've all seen though, especially with the recent surges in card values, those us that have been collecting for years have the somewhat pleasant result in that our collections have increased in value to the point where it is pretty much impossible to not treat them as an additional retirement/asset class now to some extent. As such, I personally think of the pre-war/vintage cards, especially of HOFs and superstars, as sort of the blue-chip investments on the stock market side of investing. And the shiny new stuff is more like the speculative investments that may, or may not, hold up and retain their value over the longer term, let alone giving their owners decent returns.
Having said that, if you are in a position to acquire a "white whale" card you may not see again for years, and/or otherwise cannot afford to just write a check from existing available funds for, I guess it can't hurt to review one's current retirement situation and investments and see if it would be possible to either borrow or pull-out funds from retirement accounts to make that special acquisition. As long as it looks like it will not negatively affect one's overall retirement planning and position. If one were doing it strictly for investment purposes though, I would not suggest pulling retirement funds out to simply make such an alternative investment. And I would be sure to try and calculate any potential tax or other related direct costs of pulling/borrowing such funds out of my retirement account(s), and factor that into the overall cost(s) I would spend to acquire that "white whale" item. Taking those additional costs into consideration may be that little extra deterrent many need to convince them not to do the loan/withdrawal from their retirement funds in the first place, even if it is a "white whale' item.
In any event, I would definitely not suggest ever taking money out of a Roth IRA account for such an investment as in cards. especially if there is any alternative source available. Taking a non-taxable investment and turning into a taxable investment to me is like adding insult to injury. LOL
I am wondering if at some future date, someone attempts to get items such as cards declared as a true investment asset/class, and pushes to possibly have them considered as an allowable retirement investment in say self-directed IRAs. I can already see some players in the industry, such as some of the current Vault operators, in the not too distant future possibly trying to enable people to fractionally invest in certain blue-chip vintage cards (T206 Wagners, T206 Cobbs, Goudey Ruths, '52 Topps Mantles, etc.) and maybe even assist them in setting up their own self-directed IRAs for them to do so. We've already seen and discussed how some of these Vault operators are offering people the ability to take loans/margin on their vault holdings, just like investment firms do with people's stock accounts. How big of a leap do you think it would be for these same Vault operators to then push the idea of possibly looking at cards as an actual type of retirement investing asset as well? Annual IRA contribution limits ($6,000/yr under 50, $7,000/yr over 49 in 2022) are much lower than annual 401K contribution limits. But get enough like-minded people and start adding their IRA account balances up, and I can see a Vault operator acting on their behalf to maybe buy that Wagner/Cobb/Mantle they otherwise couldn't afford individually. That way you not only wouldn't have to worry about taking money out of one of your retirement accounts to make such a card investment purchase. And for the Vault operator behind such a concept, they could actually promote the idea that the IRA contribution could possibly end up being tax deductible, based on a person's own specific tax and retirement investing situation.
We've joked about it before here on the Net54 forum, but what if all the members did get together and kick in some money to then go out and purchase a card(s) that none of us would likely ever be able to afford on our own? I've owned fractional interests in things before, like a thoroughbred racehorse, so why not the same with say a T206 Wagner, or high-grade '52 Topps Mantle? And then take it a step further and try to get it as a retirement account asset. To my knowledge, that would not be allowable right now, but things do seem to be changing a lot as we move forward.
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