When saving for retirement, the goal is to save enough so that you can maintain your lifestyle after your income goes away. If you save enough then, you can continue at your present rate of annual spending for the duration of your retirement. If not, then you have to make cuts in your lifestyle, a difficult task at any age, in order to not run out of money.
This kitten has her retirement savings plan in the markets. With the help of her fee-only financial planners, she has devised an asset allocation perfect for her level of risk necessary. However, the markets change from year to year and, as she gets older and approaches retirement, it becomes even more important that she know how much she is worth so that she can know how much to adjust her asset allocation in order to have a smooth sailing into retirement.
That’s why this kitten computes her net worth annually. She knows how her asset to liability ratio, her annual spending, her liquid and nonliquid assets, and she knows whether she’s on track to saving enough money so that she won’t have to cut her lifestyle when she leaves her job.
To read more about this topic check out Compute Your Net Worth once a Year – 2012