Summer is just about over, but we expect most Motley Fool Answers listeners didn't "sell in May and go away" -- you've been keeping up with matters of finance and investing all along...right?
However, if you happened to take a break from thinking about your money during beach season, you might have missed a few of Alison Southwick and Robert Brokamp's monthly mailbag shows. In which case, you wouldn't have noticed that Ross Anderson -- certified financial planner from Motley Fool Wealth Management, a sister company of The Motley Fool, and a regular on the mailbag podcasts this spring -- took a break from his guest hosting duties as well, so that other Fools could get their time in the sun. Now, he's back to help the podcasting duo address another batch of listener queries.
In this segment, we hear from a listener whose husband is approaching retirement, and who sees the next act of his life featuring violins in a serious way. Does a good violin qualify as an investment, and is it reasonable to borrow from a 401(k) to buy one? The Fools ponder these questions and more.
A full transcript follows the video.
This video was recorded on Aug. 28, 2018.
Alison Southwick: The next question comes from Rita. "My husband started playing violin in January 2018 and he's completely smitten. He's taking lessons on Skype. He's gone to a workshop in Italy. He's gotten four music-related tattoos. He had no tattoos before." I love it! "He's decided he wants to become a luthier once he retires in three years. He's 58 years old. Now he wants to take out a loan from his 401(k) to 'invest' in a really good violin. I think it's wonderful that he's found something he's so passionate about, but what do you think about investing in musical instruments?"
Robert Brokamp: First of all, I also think it's wonderful that he's found this whole new hobby and that he has this second career in mind. That's pretty cool. That said, I'm less excited about taking out a 401(k) loan to buy a violin.
The first thing you need to understand with a 401(k) loan is that they do have to be paid back and pretty much immediately you have to start making payments. It depends on your plan. It could be quarterly or monthly. It's often taken out of your paycheck. Just know that you don't get to keep that money out forever. You have to pay it back. If you don't, it's considered a distribution and you pay taxes and penalties if you're not yet 59 and a half.
Southwick: He's almost, though. He's 58.
Brokamp: Right, so he's almost there. The other thing about it is despite my daughter playing violin in the school orchestra, I don't really know anything about the future appreciation value of a violin, but I do know that, generally speaking, when you look at the investment value of collectibles [and there are whole indexes based on collectible wine, stamps and things like that], it's very erratic. He's clearly not an expert because he's relatively new at this. I'm not sure that he has great insight into the investment value of a violin, either, so that also gives me pause.
And finally, I don't know the whole situation, but if you have to take out a loan against your 401(k) to be able to buy the violin, that is a hint to me that maybe your overall finances aren't completely solid, yet. You might want to work on that, first.
Ross Anderson: I'm still paying for my wife's tuba...
Southwick: Tell me more!
Anderson: My wife studied music education and we have a tuba in our house that probably hasn't been touched in many years.
Southwick: How much is a tuba, if you don't mind me asking? Or is it if you have to ask, forget about it.
Anderson: This is sort of lumped into all of the student loans, but I believe it was a five-figure price tag on the tuba.
Brokamp: And has it gone up in value? Have you been following the prices of the tuba market?
Anderson: I doubt it. I don't follow the tuba market well, but if we were able to get back a percentage of that value I'd be quite happy, but I don't think she can sell it. I don't think she could part ways with it, which is really the tough thing. You don't buy a beautiful, collectible high-end instrument because you want to sell it later. You're buying it because you want to love it and play it and enjoy it with your passion. To think of it as an investment, I think you're justifying paying for a really nice instrument that's probably not really being treated like an investment.