Many workers spend much of their lives focusing on their net worth and making certain that their assets exceed their liabilities by at least a certain amount before they retire. While calculating your net worth is a relatively simple process (total assets minus total liabilities equals net worth), it still needs to be done during retirement and not just before. It is vitally important for you to keep track of your net worth after you retire for several reasons.

Net Worth on the Decline
The Census Bureau indicates that the average middle-class household in America experienced a whopping 35% decline in net worth between 2005 and 2010. This disturbing statistic is due largely to the Subprime Meltdown of 2008 and the ensuing recession, and the largest dollar drop in net worth (over $25,000) was felt in the households of those 65 and older. When you assess your net worth, you need to compare your lifetime financial goals to what you see on your balance sheet. You may have enough to live on comfortably, but will you be able to leave a legacy for your family or other heirs?

Investment Returns
If your net worth declines rapidly over a short period of time, you may need to evaluate your investment portfolio to see how it is performing. If you are drawing regular income from your liquid assets, a substantial decline will either reduce the amount of income that you will receive or draw down your remaining net worth that much faster. If your investments are dropping in value on a regular basis, then it's probably time to reallocate at least part of your portfolio into more conservative holdings such as bonds, CDs or a fixed annuity. If you're tired of the constant volatility in the stock market and frustrated by low interest rates, you may want to consider an alternative such as rental properties that can pay a stream of income regardless of market performance. But it's probably not a good idea to move all of your money out of the stock market, as it has historically yielded the highest return of any asset class over time.

Other Means of Preserving Your Net Worth
There are several other steps you can take to prevent your net worth from continually declining during your retirement. Some possibilities include:

Going Back to Work
Although you may not relish the idea of having to get up for work again every morning, it may be necessary to get at least a part-time job to provide some combination of either additional savings or current income. Working full time can obviously allow you to get your net worth back to where you want it sooner than a part-time gig, but this may not be necessary. Other alternatives also exist that are more flexible; if you were to purchase a rental property or two as a means of adjusting your portfolio, then you may be able to generate additional earned income by actively managing them.

Cutting Expenses
Foregoing some of your creature comforts is another way to preserve your net worth and may serve as a viable alternative to going back to work. If you were planning on buying a cabin cruiser this year, then postponing your purchase for five years may allow you to maintain your normal routine in the meantime without having to rejoin the nine to five crowd.

Reduce Your Income
Most financial experts recommend that you draw about 4% of your liquid retirement assets each year, unless you take a lump-sum distribution to pay off high-interest debt or for some other good reason. If you cut your distributions to 3% per year for five years, this can help your assets to grow faster and replenish your net worth without a substantial reduction in your lifestyle.

The Bottom Line
These are just some of the ways that you can keep your net worth afloat after you stop working. For more information on how to preserve your assets, consult your financial advisor.

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