Planning for Retirement? Here's Why Your Savings Matter More Than Your Net Worth.

Core Viewpoint - The focus of retirement planning should shift from net worth to savings, as net worth does not accurately reflect spendable cash for retirement [1][6]. Summary by Sections Understanding Net Worth - Net worth is calculated as total assets minus total debts, which may not represent liquid funds available for retirement [3][6]. - For example, a person with $1 million in assets and $200,000 in mortgage debt has a net worth of $800,000 [3]. Limitations of Net Worth - Not all assets are easily convertible to cash; for instance, home equity cannot be accessed without selling the home or borrowing against it [4]. - Accounts such as IRAs, 401(k)s, and brokerage accounts are more relevant for retirement funding as they can be liquidated or provide income through dividends [5][8]. Importance of Savings - Savings accounts and retirement accounts are crucial for determining retirement readiness, as they represent money that can be used to cover expenses [8]. - The value of a home can fluctuate, impacting net worth; for example, a home valued at $500,000 with a $200,000 mortgage results in a net worth of $800,000, but if the home value drops to $400,000, net worth decreases to $700,000 [9][10].