Don’t Check Your Retirement Account Balance

This really only applies to people who are decades away from retirement.

This week started off rough. Merill Lynch agreed to be purchased by Bank of America, Lehman brothers filed for bankruptcy protection, and AIG looked about fifteen minutes away from also filing for bankruptcy protection. On Monday, the Dow Jones Industrial Average fell over five hundred points, it’s largest drop in six years. Five hundred points… or around 4%. It wasn’t alone though, all the other major indices posted huge losses too and were quickly followed by all the major Asian indicies who fell 5-6%.

That’s when I logged into my Vanguard account to check out my retirement accounts. They were all red. The sad thing wasn’t that they were red, they’ve been red since last year, but they were in deep.

That’s when I realized something… don’t look at my retirement account balances. Just don’t. I can’t touch those retirement account assets until I’m sixty, which is over thirty years away for me. I rebalanced them late last year and my target retirement date is around 2040, so these swings (even though they’re huge) shouldn’t affect my thinking.

Poverty Effect

The Wealth Effect is a phenomenon where people spend more because they are or feel richer. One of the ways people feel richer is when they see paper profits on their brokerage holdings lists. When a stock does well, people feel richer even though they haven’t realized the profits yet. Likewise, the reverse is also true (the Poverty Effect). If you look at your portfolio and see huge losses, it’ll have an effect on your thinking. You’ll do something rash like sell your holdings in the target retirement 2050 fund when you should really wait.

You Shouldn’t Do Anything Anyway

What happens if you retirement funds have a one day surge and you’re up big? Are you going to sell it? Of course not, you’ll smile, the wealth effect will make you feel warm and fuzzy, and you’ll go about your day. That’s the same way you should react when you see a big drop. You should do nothing. So, skip the poverty effect and save yourself some grief by not checking.






3 responses to “Don’t Check Your Retirement Account Balance”

  1. I totally agree. What is the point of looking, unless you are like my boss, who is about to retire and lost 25 percent of his value. Ugh.

  2. retirehappy

    All it does his hurt your psyche and maybe pushes you to do something crazy. Think about the stock market last week… after the entire week, the major indicies were nearly unchanged.

  3. Wow, great advise. CNBC, CNN, MSN etc…want us to believe that we are going to be in the next great depression and all of our 401k’s will be worthless. Here’s the deal. if you look back at the last 70 years of the stock market we have had some really bad times. However, you’ll notice that it always ends up higher than where it started. If you have five years or more before you retire, ther is not much need to check your balance except once a quarter for rebalancing. In Fact if you have that much time, increase your contributions, times like this are a god send. For information about 401k’s and rollovers visit