Today we’re going to talk about your net worth, a number that everyone has but very few really know what it is and even fewer people truly understand what it means when it comes to retirement.

This episode gets us back on track with the 2026 Retirement Challenge. Each episode in this series focuses on one step you can take to determine whether you’re ready to retire in 2026. If you’re already retired, this is still a valuable exercise to make sure your plan is on track.  And if you’re a client of Parker Financial, you can rest assured—we’re already doing this work for you.

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471 – Is Your Net Worth Lying to You? – 2026 Retirement Challenge Part 4

Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now here is your host, Jason Parker,

Jason Parker: America. Welcome to episode number 471. The title is.

Is your net worth lying to you? This is part four of the 2026 Retirement Challenge, and today we’re gonna talk about your net worth, a number that everyone has, but very few people really know what it is. Even fewer people truly understand what it means when it comes to retirement. This episode gets us back on track with the 2026 Retirement Challenge.

Each episode in this series focuses on one step that you can take to determine whether or not you’re ready to retire in 2026. If you’re already retired, this is still a valuable exercise to make sure your plan is on track. And if you’re a client of Parker Financial, you can rest assured that we’re already doing this work for you.

Before we get started, let’s take a minute to renew our mind. Romans 12 three says, for by the grace given me, I say to every one of you, do not think of yourself more highly than you ought, but rather think of yourself with sober judgment in accordance with the faith that God has distributed to each of you.

And then something fun to put a smile on your face. Why did the baker work so hard? Because he needed to make some dough.

You know, money isn’t everything, but it sure keeps the kids in touch. If you think no one cares about you, try missing a couple of payments. So far in the 2026 Retirement Challenge, we’ve covered your why guaranteed income sources and your spending. Today. We’re gonna add it all up by focusing on your net worth.

I’m gonna share one of the biggest mistakes I’ve seen people make with this exercise, and we’re gonna walk through a simple way to determine at a high level, whether or not you’re on track to retire. Now, your net worth is not as complicated as people think. It’s simply everything you own minus everything you owe.

For example, let’s say you have $1 million in your 401k in your home is worth $500,000. That gives you total assets of $1,500,000. But now we need to subtract your liabilities. So if you still owe 250,000 on your mortgage, your net worth would be $1,250,000. It’s really that simple. Just assets minus liabilities.

I remember when I was in college, I got my first credit card from a gas station. The funny thing about that credit card is it made me feel wealthy. So every time we’d, we’d be ride sharing to work, I’d stop and ask all my friends in the car if I could go in and buy them a mocha, uh, a cup of coffee ’cause I had this credit card.

Next thing I know, at one point I owed $400 on that stupid credit card, and it took me forever to pay it off. I was waiting tables at a Mexican food restaurant. At the same time, I had about $6,000 in student loans. The only thing I owned was my car, which was valued at about a thousand dollars. So my net worth at that point was negative.

I owe, I was in the hole. $5,400. I owed more than I was worth, at least on paper. One thing that that number doesn’t capture is your human capital, your ability to earn, to grow, to develop skills, and create value over time. And in many cases, that’s really our most valuable asset, especially early in life.

Sometimes it’s helpful and even fun to remember where we got started. It gives us perspective, it helps us appreciate the progress that we’ve made, and it’s really amazing to think of the progress that we can make in 30 years. And for those of you that are still early on this journey, it’s important to remember that where you start is not where you end up, but like all things in retirement planning, your net worth is not static.

It changes with time. The markets, your contributions, withdrawals, debt, pay down, it can fluctuate by the second. If you’re an investor, at a minimum, I recommend updating your net worth once per year. Some people prefer to track it monthly. In many ways, your net worth reflects a lifetime of financial decisions.

During our working years, we trade time for money, and at some point, hopefully we realize it’s not a good idea to spend everything that’s coming in. We need to set aside some for the future. My dad used to explain money to me like this. He said, Jason, every dollar you save is like a worker. It’s like a little soldier, and each worker goes out into the world and works for you.

And the more workers you have, the more they can produce. Those workers represent your time, your energy, your expertise, your sacrifices, late nights, missed moments, the risks that you took, the skills that you developed, and in some instances, maybe even an inheritance from those who came before you. Over time, you keep enough of those workers, they begin producing more than you can earn on your own.

For example, if you’ve saved $2 million, you’ve got 2 million little workers out there working for you, and they grow at 10%, that’s 200,000 in a year. Maybe your job was only paying you 100,000. At some point, your money begins earning more than you do, and that’s when you have the option to step away, not because you have to, but because you can.

One of the biggest mistakes I’ve seen came from a couple who brought in a spreadsheet showing me their net worth, which they had accurately calculated. They added everything together, their investments and their real estate, and then they applied a 4% withdrawal rate to that total. They believed that number represented how much they could safely spend each year.

But the problem was that they were including the value of their home in that withdrawal calculation. Even though they had no intention of selling the house or accessing the equity. For the sake of this example, let’s say that their net worth was $2 million and their home represented $1 million of that.

They were taking a 4% withdrawal on the full $2 million, thinking that they were following the 4% withdrawal rule. But in reality, they should have only been taking 4% of the 1 million that was actually invested and available to produce income. What that meant is that they weren’t taking a 4% withdrawal, they were taking an 8% withdrawal on their investible assets, and that’s where the problem showed up.

Most research suggests that depending on your asset allocation, your strategy, your time horizon four to maybe 6% withdrawal rate could be reasonable. I’m not aware of any research that supports an 8% withdrawal rate as being sustainable over a long period of time. And you can imagine how that conversation went.

It wasn’t necessarily catastrophic because we caught it early, but it introduces real risk. It could mean needing to sell the home later, reduced spending, or potentially tap into home equity through something like a reverse mortgage. So the most important thing to understand is that not all net worth is created equal retirement isn’t really about your net worth.

It’s about the income that your net worth can generate. At the end of the day, we don’t spend assets, we spend income. It’s entirely possible to be asset rich and income poor. For example, you could own a home worth $2 million and have no debt, and on paper that gives you a $2 million net worth. But if that asset isn’t producing income, and if it’s not easily converted into income, it may not support your lifestyle in retirement.

That’s why it’s not just about your net worth, it’s about how much income your assets can produce, and that’s how your net worth could be lying to you. And if your assets can’t generate the income you need, that’s not a great position to be in if retirement’s your goal, remember, retirement is an exercise in cash flow.

It’s all about making sure you have enough income coming in to cover your expenses. It is not an exercise in net worth. To make this useful for retirement planning, we need to break net worth into three categories. Number one, are your liquid assets. These are the assets that can generate income to support your lifestyle.

IRAs, Roth IRAs, brokerage accounts, money market accounts, HSAs accounts that can be converted into monthly withdrawals. This is the number that matters for retirement income planning. The second category is real estate. These are non-liquid assets, so your home has value, but it’s not easily converted into income.

Yes, you could access the equity through a home equity line of credit or a reverse mortgage, or you could sell the house. But that’s very different than drawing income from an investment portfolio. You’ll also want to list rental property under real estate and account for the rental income separately.

And then the third category are your other assets. This includes things like the value of cars, collectibles, a business that you could sell, these assets contribute to your overall net worth. And they matter for estate planning or taxes, but they’re typically not part of your income strategy. So let’s put all these pieces together.

Let’s say a couple is gonna have a total of $5,000 per month of social security income between the husband and wife. And then let’s say they have $1 million in liquid investments. A common rule of thumb is the 4% withdrawal rule that suggests that they could withdraw about $40,000 per year from their portfolio.

Now the 4% withdrawal rule is a helpful guideline. It’s not a guarantee. Markets taxes, your personal situation, all matter. But at a high level estimate, this works. So they’re gonna have $5,000 a month from Social Security that’s $60,000 a year from Social Security, and then we can take $40,000 per year from their investments.

That gives them $100,000 per year of income. So now we go back to the retirement spending plan from part two of the challenge. If their spending is below $100,000 and we account for inflation taxes in a reasonable time horizon, then they could be in a great position to be able to retire. Over the years, I’ve learned that most people have a pretty good idea of how much they’ve saved, but most people don’t really understand how much income their investment portfolio might be able to generate for them over their lifetime, and they have a much weaker understanding of how much money they spend.

And that’s why retirement planning can feel overwhelming. It’s not just one number. You can have two people with the exact same net worth and give them completely different advice based on when they can retire, because we also need to understand spending health, longevity, taxes, you can’t look at net worth and isolation.

And yet, that’s exactly how the media often frames it. What’s your number? Well, 2 million tied up in real estate is very different from $2 million in an investment portfolio. Once we know your liquid assets, we can use rules of thumb to estimate spending, but the problem with rules of thumb is that we all have different size thumbs.

The better approach is to create a detailed year by year cash flow plan. For your specific situation so that we can account for all the nuance that’s specific to you. So your assignment for this week is I want you to sit down and calculate your net worth, but I want you to break it into three categories.

Add up all of your liquid assets, then add up all of your real estate. Then finally add up all of the other assets that you have. Once you’ve completed the net worth exercise for 2026, you’ve done a lot of the heavy lifting needed to determine whether you can retire at this point. You understand your why.

Why do you wanna retire? How do you wanna spend your time, and who matters the most? You know how much guaranteed income you have coming in. You have a clear understanding of your current spending and a projection for how that spending could change over time, and you’ve calculated your net worth so we can determine how much you’ve saved and how much of that savings can be used to supplement your guaranteed income sources.

Ultimately, what we’re trying to answer is have you saved enough to spend your time and your money on the people and the experiences that matter the most to you? Because the goal isn’t just to retire. The goal is to retire with confidence without having to worry about the need to go back to work later because of a miscalculation.

And that’s where clarity begins and where Clarity begins. Confidence is built and where confidence is built. Freedom follows. As we continue through the retirement challenge, the ideas we explore next are gonna focus more on optimization and implementation. And here’s the exciting part. Everything builds from here because once you have a strong foundation, every decision you make going forward, it has the potential to improve your outcomes as you approach retirement.

Your net worth often reflects a lifetime of productivity, responsibility, and stewardship, and sometimes a bit of luck and timing sometimes. The more you’ve accumulated, the more the weight that you feel as you’re managing these resources. Life isn’t all about money and some of the most impactful, meaningful lives have had very little, if any, net worth at all.

But money and your net worth can be a really helpful tool depending on your goals. It gives you options, it gives you flexibility, and it can help support the people and the experiences that matter the most to you. One thing to be mindful of is that over time, our net worth can subtly shape how we see ourselves.

It can create a sense of pride or even entitlement if we’re not careful. Many of the people we serve, and many of you listening, have been very financially successful, and that’s something to be proud of. But I think the real question is how do you balance success with humility? How do you stay grounded, grateful, and focused on what really matters even as your financial life grows?

And I’d love to hear your thoughts on that. Send me an email and let me know if it would be okay to share some of your ideas on future podcasts.

Announcer: Thank you for tuning in to Sound Retirement Radio. For articles, links and resources from today’s show, visit sound retirement planning.com. If you enjoy the podcast, share it with a friend and give us a five star review.

Ready to kickstart your retirement planning head over to retirement budget calculator.com. Need assistance with an. Investment management explore our services@parkerfinancial.net. Information and opinions expressed here are believed to be accurate and complete for general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products.

Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims paying ability of the company.

Investing involves risk. Jason Parker is the president of Parker Financial LLC, an independent fee-based wealth management firm. Located at 9 2 3 0 Bayshore Drive Northwest Suite 2 0 1, Silverdale, Washington. For additional information, call 3 6 0 3 3 7 2 7 0 1 or visit us online@soundretirementplanning.com.