The technical definition of net worth is all assets minus all liabilities. That's what it is, plain and simple, BUT, that number may have no practical benefit for someone, as you suggest. So people calculate their assets various ways depending on what is important for them to know. In my case, I look at several numbers. Are any of them "net worth"? I don't really care what the definition is, I care what the number tells me. One number is basically net worth in the technical sense, but I don't include tangible personal property (no furniture, cars, clothes, etc.). This is just so I have a general sense of estate value. Then I look at all liquid assets plus the value of my anticipated modest pension. That's the number I use to determine the value of assets for the purpose of my investment allocation. Do I have to include pension? No, but that's the way I do it. Interestingly, I don't include Social Security for this purpose. I could, but I don't. I do, however, include the value of Social Security (and pension) plus all liquid assets when calculating a projected safe withdrawal rate in retirement. None of the above calculations above is truly "net worth" based on the accepted definition. The media would do all of us a service by being very clear what they are reporting when they report about net worth as well as specifying where they are getting their figures from. I don't believe there is much consistency, notwithstanding the standard, agreed upon definition. Accordingly, I take the media reported average and median net worth figures with a grain of salt.
Thought provoking article. Would you mind sharing what percentage of your anticipated income needs/desires you intend to cover with annuities and at what age you expect to purchase them?
Comments
The technical definition of net worth is all assets minus all liabilities. That's what it is, plain and simple, BUT, that number may have no practical benefit for someone, as you suggest. So people calculate their assets various ways depending on what is important for them to know. In my case, I look at several numbers. Are any of them "net worth"? I don't really care what the definition is, I care what the number tells me. One number is basically net worth in the technical sense, but I don't include tangible personal property (no furniture, cars, clothes, etc.). This is just so I have a general sense of estate value. Then I look at all liquid assets plus the value of my anticipated modest pension. That's the number I use to determine the value of assets for the purpose of my investment allocation. Do I have to include pension? No, but that's the way I do it. Interestingly, I don't include Social Security for this purpose. I could, but I don't. I do, however, include the value of Social Security (and pension) plus all liquid assets when calculating a projected safe withdrawal rate in retirement. None of the above calculations above is truly "net worth" based on the accepted definition. The media would do all of us a service by being very clear what they are reporting when they report about net worth as well as specifying where they are getting their figures from. I don't believe there is much consistency, notwithstanding the standard, agreed upon definition. Accordingly, I take the media reported average and median net worth figures with a grain of salt.
Post: Is your net worth, worth it and what’s in it? RDQ
Link to comment from October 29, 2024
Thought provoking article. Would you mind sharing what percentage of your anticipated income needs/desires you intend to cover with annuities and at what age you expect to purchase them?
Post: Built for Ease
Link to comment from May 1, 2021