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What is Net Worth and Why Does it Matter?

Jun 20, 2022

Most of us never think to assess our net worth in our twenties or thirties. We’re just getting started in our careers and possibly building families, and so things like net worth don’t usually take priority. 


But as you head toward retirement, you might hear a lot about “net worth”. What is it, and why does it matter? And how do you stack up against the average retiree? 


Thanks to new data from Personal Capital, we have some figures to share with you. The good news is that, on average, people in their sixties enjoy a higher net worth than people in any other decade of their lives. Therefore, you’re likely to hit your highest lifetime net worth around the time you get ready to retire. 


How do we calculate net worth? Net worth amounts to the sum of your assets minus any debts that you hold. That simple equation will result in your net worth from any sources such as real estate, cash on hand, your retirement account, or investments. 


What is the average net worth of retirees? According to Personal Capital, the average net worth of a person in their sixties is 1,726,840. However, that number could include just a few very wealthy individuals who pulled up the average quite a bit. And so, the median net worth of 549,872, which is still quite healthy, is probably a more reliable indicator. 


Why is net worth important? Essentially, your net worth determines the lifestyle that you can live. That’s a bit blunt, and might feel a bit intimidating to some, but it’s the truth. So if yours feels a bit too low, waiting a few more years before retiring could be a wise strategy. And of course, we have other ways of potentially increasing your net worth before retirement. 


How do you preserve your net worth? Once you’ve retired, you want your retirement income to last for the rest of your life, and we need to discuss a strategy for taking withdrawals from your retirement account. Those funds, combined with Social Security and any other income you might have established, will provide for your lifestyle in retirement. 


As your target retirement date approaches, meet with  me regularly to review your net worth, your investment strategies, and topics such as spending and budgeting.  I can help you decide how to approach retirement wisely so that you can relax and enjoy this time of your life. 

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How to Safeguard Against an IRS Audit

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