Does Your Net Worth Include Your 401(k)?

Your 401(k) and other retirement accounts often make up a large portion of your net worth. And net worth is one of the most important benchmarks for appraising your financial health. Growing your retirement accounts can improve your financial outlook and support your long-term goals. A financial advisor can help you build a financial plan to grow your wealth over time.

Retirement Accounts and Net Worth

In 2022, retirement accounts such as 401(k)s ranked as the top contributor to household net worth, according to a 2022 Census Bureau analysis. The Census Bureau’s “Wealth of Households: 2022” report found that 401(k) and other retirement accounts accounted for approximately 32.1% of the typical household’s assets, slightly ahead of homeowner equity (31.4%).

Around 60% of households owned retirement accounts. Bank accounts were the most commonly held asset, owned by nearly 96%. Vehicles and homeowner’s equity also showed up more frequently on household balance sheets than retirement accounts, according to the Census Bureau.

Understanding Net Worth

Calculating net worth is simple. The formula is: Assets – Liabilities = Net Worth

Assets are things that have value. They come in many types and sizes. Along with retirement accounts, bank accounts, vehicles and homes, assets may may include business equity, rental property and investments held outside of retirement accounts. Depending on who’s counting, asset totals may not include items of value such as household furnishings. Pension plan equities, unlike those in 401(k)s, often don’t appear in net worth tallies.

And take care to distinguish between income and assets. That is, your expected salary for the coming year isn’t an asset, although it’s certainly important for cash flow.

Liabilities also may be varied. Typical liabilities include mortgages, auto loans, credit card balances, personal loans and student loans. If you borrow from your 401(k), that’s a liability as well. Essentially, a liability is anything you owe. To total liabilities, add up outstanding loan balances, not loan payments. Payments help with cash flow projections, but only loan balances factor into net worth.

To do the calculation, simply add up all the estimated value of your assets and subtract your liabilities. The result is your net worth. Financial software can automate the math, giving you an easy way to monitor changes in your net worth.

Note that it’s possible to have negative net worth if your liabilities come to more than your assets. While this is not a desirable sign, you may temporarily have negative net worth if, for instance, you’ve recently purchased a home and taken on a large amount of debt.

Why Net Worth Is Important

Economists use net worth to gauge how households might handle financial stress. With higher net worth, people can better cope with unemployment, illness or other unexpected and sizable cost or loss of income. Net worth also enables comparison, either to your former self or to other individuals and families.

The 2022 Survey of Consumer Finances, a report issued every three years by the Federal Reserve, pegged $192,700 as the net worth of the median family. That means if your net worth is $192,700, you are right in the middle, with higher net worth than half of families and lower net worth than half of families.

Net worth tends to vary by age. For instance, the Fed survey found that households headed by someone between 65 to 74 had the highest median net worth of about $410,000. The median net worth of households led by someone between 35 and 44 years old was $135,300.

The direction of changes in your net worth measures your financial strategy’s effectiveness and may be more important than the sheer size of your net worth. Up, of course, is usually better, and people’s net worth typically improves over time.

The Fed surveys show that the median family net worth increased approximately 37% between 2019 and 2022. Not all of that growth came from better financial decision-making. Net worth naturally fluctuates with business cycles and changes in the valuation of various asset classes, such as real estate and stocks.

Strategies for Increasing Your Net Worth

You can increase net worth by increasing assets, reducing liabilities or both. Assets like retirement contributions usually build net worth more effectively than depreciating ones like vehicles. Here are some ways to increase your net worth:

Leverage Tax-Advantaged Retirement Accounts

To grow your net worth, start by contributing consistently to tax-advantaged retirement accounts like a 401(k) or IRA. Aim to contribute enough to receive your full employer match, if available, and increase your deferral rate by 1% each year until you hit the maximum limit. Consider opening a Roth IRA or traditional IRA to supplement your 401(k), depending on your income and tax strategy.

Pay Down High-Interest Debt

Cutting high-interest debt is another direct way to improve net worth. Focus on paying off credit cards first using either the avalanche or snowball method, then redirect freed-up cash toward savings or investments. Automating extra payments on personal loans or student debt can also accelerate your progress.

Trim Your Expenses and Spending

Review your spending regularly and redirect nonessential expenses to investment accounts. Setting up automatic transfers into a brokerage or high-yield savings account can help you accumulate assets without relying on willpower. If you own a home, consider making one extra mortgage payment per year or refinancing to a lower rate to build equity faster.

Actively Track Your Net Worth

Finally, track your net worth quarterly using apps or spreadsheets to monitor trends and stay motivated. Seeing steady progress—even in small amounts—can reinforce good financial habits and help you identify setbacks early. Use these check-ins to reassess goals, adjust savings targets, or rebalance investments as needed to stay aligned with your long-term plans.

Bottom Line

Net worth is one of the most informative and helpful figures for understanding your financial position, and 401(k) plans and other retirement accounts represent one of the biggest influencers on net worth. Contributing to retirement plans, especially when an employer is matching contributions, can effectively improve your net worth and help you achieve your financial goals.

Tips on Building Wealth

A financial advisor can help you craft a plan to boost your net worth. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s free investment calculator to get a good estimate of how to grow your money over time.