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Retirement Planning 101: Calculating your Net Worth

| November 27, 2018
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One of the first steps in creating a sound retirement plan is calculating your net worth.  It establishes a baseline for determining the following;

  • How much you have for Retirement
  • Retirement cash flows
  • Asset allocation or mix of stocks and bonds
  • Tax Planning
  • Inflation protection

Net Worth = What you own – What you Owe

This is pretty easy, but takes a little detective work on your part. 

Liquid Assets - Most of this information will be up to date since these are liquid assets and updated in real time.

  • Cash                                                        $_________________
  • CDs                                                         $_________________
  • Taxable investment accounts                  $_________________
  • Trusts                                                      $_________________
  • IRAs and other retirement plan assets    $_________________
  • Total Liquid Assets (Step #1)               $_________________

Non-liquid assets. These assets are typically harder to value and require more work to turn into a liquid asset.

  • Real estate                                             $_________________
  • Private investments                                $_________________
  • Collectibles                                             $_________________
  • Total Non-liquid assets (Step #2)        $_________________


Liabilities – These are amounts that you owe and typically charge an interest rate.

  • Mortgage(s)                                            $_________________
  • Student loans                                         $_________________
  • Car loans                                                $_________________
  • Securities margin loans                          $_________________
  • Lines of credit                                         $_________________
  • Unpaid credit card balances                   $_________________
  • Other debt (e.g. unpaid taxes, alimony) $_________________
  • Total Liabilities (Step #3)                     $_________________

*Net Worth = (Step #1 + Step #2) – Step #3  $_________________

Now that you have a baseline, it’s important to ask yourself the following questions;

  • What will I need each year in retirement to pay my bills and accomplish my goals?
  • How much is inflation going to affect how much I need each year?
  • What is my time horizon?
  • What return can I expect in retirement?

Retirement should be a happy time and enjoyed to the full extent.  Make sure that you plan accordingly so you can live out your golden years on your own term.  If you would like to talk to more about your Net Worth and creating retirement income please email us or give us a call!

*This calculation is a simplistic version, and only one piece of a large puzzle.  It will vary from person to person, and non-taxable accounts can have a large impact on after-tax Net Worth.  This is not meant to serve as tax advice for any individual, and when planning a detailed retirement plan it’s important to talk to your financial professional.  The contents of this article should not be construed as tax advice. Please contact your tax professional.


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