Transcript:
Easan Arulanantham:
Should I include hobbies that can be profitable in my retirement plan? So this person is going this question. It says, I love collecting baseball cards. And from time to time I sell these cards for a profit. And, you know, what should I do with this in my plan? And how should I report to the IRS?
Tom Vaughan:
The IRS questions, the easiest one probably should report it in some form or fashion. I mean, my, my outlook on taxes is just I don’t, I don’t want to poke the bear. Personally, I I’d be very conservative there. But everybody’s different. I remember once I had a client, tell me that, you know, when he submits his taxes, he calls it his bid. You know, this is my bid. This is what I think I owe. And, you know, if he doesn’t hear anything back, then he just assumes the IRS, you know, is accepted as bid. So I don’t have time for an audit. So I’m not going to do that. But nonetheless, you know, for an IRS standpoint, you want to you want to report these? Yeah, actually, it’s kind of amazing. Collectibles have gone bananas. Yeah.
Easan Arulanantham:
So I had a friend’s dad. So my friends, when we were small, we collected Pokemon cards. And my friend found a box of these first edition Pokemon cards in the attic. And so he was he threw it up on eBay. And he sold them individual packs. And in the end, he came out with $86,000. Yeah. That’s pretty amazing. Yeah. But the crazy part now is, you know, eBay and PayPal, they’re reporting directly to the IRS. So you have to be careful to that you make sure that you report your sales, otherwise, they’re gonna come for their money.
Tom Vaughan:
Treat it like a business. Really, I mean, in the sense of, hey, I, you know, I made this profit on these on these sales, and I think you’ll do fine. As far as that goes. Yeah, there it goes. It’s everywhere, right. I mean, it’s golf clubs, oh, golf clubs, it’s cars, paintings, of course, have, you know, always had that not everything makes money. So that’s one of the difficulties of it is sort of like the stock market. Not every stock is great. So you kind of have to know you know what you’re doing. But the marketplace is global now, which really does open up the doors for a lot more potential customers. Now, if you had Pokemon cards before, I mean, trying to sell them, you know, maybe in a swap meet or something, right? You get out on eBay, you know, or some of these big platforms, that’s kind of changed that whole collectibles arena, as my son was telling me about people doing shoes sneakers. Yeah, I mean, that’s like a huge aspect of what we had the NF Ts, right, which was a collectible, digital token, essentially, a picture of some type that you got, you know, the code to those, you know, Pete, maybe, yeah, but somebody made money on it somewhere in there. So, yeah, I mean, as part of a strategy for a retirement plan, maybe, you know, if you really wanted to work at it, right, you could be hunting around for buying pokey cards at a certain price, and hopefully being able to sell them at a higher price. I mean, that’s essentially what we do with the stock market. I mean, we’re hunting, looking and saying, Okay, what’s gonna buy it this and Apple is going to turn into, you know, even bigger company and worth more than it is now, I don’t have any problem with that, actually, I think, you know, especially because something you enjoy doing. And there’s a lot of avenues now to do that. So I think it’d be interesting.
Easan Arulanantham:
As long as you’re not kind of selling the future. That’s the one caveat, I would say, you know, if you’re not, you know, if there’s a small hobby, saying you’re like paying 510 $1,000, which isn’t gonna make or break your retirement hobby, then it’s totally fine. It’s where I become concerned is when you start to, like, take that, you know, 50 $100,000, and you’re poor. And if you lose it all, what would happen to your plan? And so, it, there’s a balance, you know, can this hobby be profitable? Yes. Is it gonna make or break my plan? If it goes badly? That’s one question. You have to ask yourself.
Tom Vaughan:
Start small, that works, plow the profits back into it, and just keep growing it and growing it, and eventually, you could take some profits out. But if it doesn’t work, you don’t lose a lot, right? I mean, that’s, that’s what we do. A lot of times with more aggressive investments, start small, just see what happens. And if it continues to do well, we kind of just let it grow. So you know, if you’re going to collect cards, or I have a client class gold coins, pretty expensive. And so you have to have a net worth. That’s pretty high to say that you can start small there because a lot of those are five to $20,000 per coin. I think it’s an interesting hobby in the sense that gold has a inflationary hedge aspect to it. And it’s minted, right so that could do quite well actually, but much more expensive hobby and of course, you get into cars you get same thing. Yeah, cars have done pretty well over the years, but pretty high buy in price. And unless you’re going to do it yourself like a fix up thing, even that it’s going to cost you something. But there’s nothing wrong with that. And in fact, I did have a client that used to do Mustangs. And so that’s one of the hobbies, he had that he fixed up a Mustang, find one that was in bad shape, fix it up, resell it and keep the differential and, you know, he just kept going. And so yeah, there’s lots of ways of doing that. It’s, I think it could be fun.
Easan Arulanantham:
Always remember that this is a hobby that brings enjoyment. And so when you kind of add the money aspect, if you stopped to have enjoyment, maybe it’s time to take a step back. Yeah, because I had a friend that loved fantasy baseball. And he loves baseball. But then it became like a kind of a second job for him. When he played fantasy baseball, he was making money off of it. But then he stopped rooting for his team and was only looking for the players to do well. And so he lost that joy. And so for collectibles, it’s a hobby first, and you should have that joy from it.
Tom Vaughan:
That’s a good story, because I got into fantasy football when it first came out. And I was pulling up all the spreadsheets and everything. And I kept winning, I won and won. And I started playing, you know, in the bigger money leagues. I had, you know, one year where I had to report a bunch on my tax return and what have you. But my wife always used to laugh at me, she says, you’re still only making about $1 an hour, you know, and it, it just kind of took over. And then the things that I was doing in downloading all this data and putting it together myself and now available. Everybody has that. But back then they didn’t. So I kind of had a little bit of an edge. But yeah, it got to be a bit much. You know, I was getting up too early to see what happened with my trades or whatever. And yeah, it’s got to be something that’s enjoyable. First, and then you know, life is short. So yeah, that makes sense.