When approaching retirement, it is important to assess your financial assets by creating a personal net worth statement. A net worth statement is a balance sheet that shows the total of your assets (what you own) minus your liabilities (what you owe).
Assets you own may include:
Cash — Cash or things that can be easily converted to cash. A certificate of deposit (CD) is considered a cash asset, but remember that redeeming it before maturity may include a penalty.
Investments — Financial assets that can be cashed in or sold for their current market value. Prices will fluctuate with market conditions. Annuities may have surrender penalties. You may also owe income taxes and early distribution penalties on money taken from annuities.
Retirement Assets — Assets that are held in tax-advantaged retirement accounts, such as 401(k) plans, IRAs, and pensions. You will owe regular income tax on withdrawals from tax-deferred accounts, and withdrawals before age 59-1/2 usually involve an additional 10% penalty.
Personal Assets — Real estate and personal property that can be sold but usually not as quickly as other assets. Assets such as vehicles, furniture and appliances usually depreciate in value; so they are worth much less now than when you purchased them, even if they are still in good condition.
Calculate the value of your assets:
- Write down the current amount in each bank account where you keep cash and savings: such as checking, savings, and money market accounts; certificates of deposit (CDs); money market funds.
- If you have savings bonds that you have held for at least a year, use the calculator at http://www.treasurydirect.gov/indiv/tools/tools_savingsbondcalc.htm to determine the current value or call a bank to find out the current value.
- If you have a whole life insurance policy (one that builds a cash value), find out the cash surrender value by checking your policy or calling your agent.
- If you own stocks, bonds or mutual funds, check the current value on financial websites or use the value from your last statement.
- Use the surrender value for annuities. For several years after purchase, the insurance company will charge a surrender fee if you withdraw the money.
- Use the current value of your house or other real estate — not what you paid for it. Check with a real estate agent in your area about the market value of your home.
- Check a used vehicle guide (Blue Book) online at http://www.kbb.com/ or through your local library, insurance agent or banker for the current value of your cars and trucks.
- To find out the value of your boat, camper, snowmobile or any other recreational vehicle, talk to a dealer who sells used recreational vehicles.
- Make a conservative estimate what you could realistically get if you sold household items and personal property today.
- List the current value of your pension, IRAs or other retirement plan, using the amount you would get if you were to cash them in today.
- Add any other types of income-producing assets such as a business, rental property, or royalties.
Calculate your liabilities:
- Mortgage: You may be able to find the balance of the mortgage loan on your monthly statement. If not, ask the lender for the outstanding balance. Also list any second mortgages or home equity loans.
- Other debt: Record the balances due on all credit cards, charge accounts, installment accounts and other loans. Be sure to list the total balance due, not just the monthly payment.
- Other outstanding bills: List any current or overdue bills you owe, including the dentist, utilities, telephone, and property taxes which are billed one year later and are owed even if you sell the home.
List your assets and liabilities on a sheet of paper, or create a Word or Excel document to track them. List specific assets in a column to the left, and specific liabilities in a column to the right. After you have totaled both your assets and your liabilities, subtract total liabilities from total assets. What’s left is your net worth.