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A higher brokerage account balance is a good thing. Read on to see why I don’t celebrate too much when mine goes up.
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Americans think it will take an average of $1.27 million to retire comfortably, according to Northwestern Mutual. I’m not as convinced that $1.27 million is the ideal retirement number. But I’m doing my best to save as much for retirement as I can.
I’m using several tools to build savings for retirement. I have an IRA that I funded up until a few years ago, and I have a solo 401(k) that I contribute to regularly at present. I also have an HSA whose funds I’m hoping to carry forward into retirement.
But I also use a regular old brokerage account to save and invest for retirement. Although that account doesn’t give me any tax breaks, it allows me to access my money when I want.
I try to make a point not to check my brokerage account balance too frequently. But there are times when I need to peek in, such as if I’m thinking of buying shares of a given stock or I want to unload shares due to a company’s outlook becoming less rosy.
Sometimes I’ll review my brokerage account and see that my balance is up. But while that’s a good thing in theory, it generally doesn’t get me too excited for one big reason.
It may only be a temporary increase
The stock market can be extremely fickle. It’s possible for the value of your investments to rise substantially, only to plummet a week or month down the line.
That’s why I try not to get too hung up on my exact balance at any given point in time. I know it has the potential to change, so unless I’m taking my gains and cashing them out, they’re not even official.
The money isn’t for now
As I mentioned earlier, I’m keeping some of my retirement investments in a regular brokerage account. The reason is that I can’t touch my IRA or 401(k) until age 59 1/2 without penalty. So if I want to retire earlier than that, I’ll need money in an unrestricted account.
But because of that, near-term gains in my brokerage account don’t really give me a reason to celebrate. As much as I’d love to take the money and use it to improve my life, it’s not for now. So while it’s cool to see a gain in my account, the reality is that it’s not benefiting me anytime soon.
Plus, cashing out gains could result in a pretty large tax bill, depending on how long you’ve held your investments for. And while taxes are a part of life, they can sour the deal just a bit.
All told, my goal is for my brokerage account to gain value over time. But when I see an increase, I don’t necessarily jump for joy. I don’t think that makes me a negative person. I think I just have a realistic view of the stock market. Also, I’m committed to not touching that money for many years, which is a good thing — even if it takes some of the fun out of seeing those gains pop up.
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