Does Net Worth Include 401k

Net worth refers to the value of an individual’s assets minus their liabilities. Generally, a 401(k) account is considered an asset and should be included when calculating net worth. However, there are certain situations where it might not be included. For example, if the 401(k) account is a loan-based plan or if it is subject to a domestic relations order. Additionally, if the account is not yet vested, it may not be considered an asset for net worth purposes.

Components of Net Worth

Your net worth is a measure of your financial health, calculated by subtracting your liabilities from your assets. Assets are anything you own that has value, while liabilities are anything you owe.


  • Cash
  • Savings accounts
  • Investments
  • Real estate
  • Retirement accounts (such as 401ks and IRAs)


  • Credit card debt
  • Student loans
  • Mortgages
  • Personal loans

Calculating your net worth is straightforward. First, list all your assets. Then, list all your liabilities. Finally, subtract your liabilities from your assets to get your net worth.

Savings account$5,000
Real estate$100,000
Retirement accounts$50,000
Total Assets$166,000
Credit card debt$5,000
Student loans$10,000
Total Liabilities$115,000
Net Worth$51,000

As you can see, this person’s net worth is $51,000. This means that they have more assets than liabilities.

Retirement Account Inclusions

Retirement accounts, such as 401(k)s, IRAs, and pensions, are not typically included in net worth calculations. Here is a table summarizing the inclusion or exclusion of different types of retirement accounts:

Retirement AccountIncluded in Net Worth
PensionYes, if vested

401(k)s and IRAs are not included in net worth because they are tax-advantaged accounts meant for retirement savings. While you can contribute pre-tax income to these accounts, you are typically taxed on withdrawals during retirement. Including them in net worth would result in double taxation.

Pensions are treated differently because they are employer-sponsored plans. If you are vested in your pension, meaning you have met certain eligibility requirements, your pension is considered an asset and will be included in your net worth.

Understanding Net 401k and Deferrals

Net worth is a measure of your financial health and represents the difference between your assets and liabilities. It captures the totality of your economic well-bring at a specific point in time.

Does Net Wealth Comprise 401k Savings?

Generally, yes, 401k accounts are included in your net worth. The rationale is that they are considered assets since they represent a store of value that can be used in the future.

Types of 401k Contributions

  • Traditional 401k: Contributions to this plan are made pre-payroll deduction, meaning money is taken out of your paycheck before taxes are applied. This lowers your taxable income, resulting in lower current-year tax payments, and attracts tax benefits in the future during withdrawals.
  • Roth 401k: Unlike traditional 401k, Roth 401k features post-payroll deduction. Contributions are made using post-taxes dollars, thus lowering your take-home pay. However, withdrawals are usually tax-free.

401k Deferrals

401k deferrals refer to the portion of your paycheck channeled towards your 401k account. The typical 401k contribution limit is $22,500, as of 2023. Individuals who are 50 years or older can invest an extra $7,500 known as a catch-up contribution..

Year401k Contribution LimitCatch-up Contribution LimitTotal Limit

Investment Growth and Net Worth

To accurately calculate your net worth, it’s crucial to understand what assets and liabilities are included. A common question is whether your 401(k) balance should be factored into your net worth. The answer is yes, as a 401(k) is a valuable asset that can significantly impact your financial health.

Here’s how a 401(k) contributes to your net worth:

  • Value of Investments: Your 401(k) balance represents the current market value of your investments, such as stocks, bonds, and mutual funds. This value fluctuates based on market performance.
  • Future Income: Your 401(k) is intended to provide you with retirement income. The growth of your investments over time will determine the potential income you can generate in the future.
  • Tax Benefits: 401(k) contributions are often made on a pre-tax basis, reducing your current taxable income. This tax savings can contribute to your overall net worth.

It’s important to note that when calculating net worth, the value of your 401(k) is included as an asset. However, you cannot access these funds without penalty until you reach retirement age. Therefore, it’s crucial to consider your 401(k) as a long-term investment.

In summary, your 401(k) balance is a valuable asset that should be included in the calculation of your net worth. Its investment growth, future income potential, and tax benefits contribute to your overall financial health.

401(k) Assets and Liabilities
Value of InvestmentsOutstanding 401(k) Loans

Well, there you have it, folks! Understanding whether your 401k is included in net worth can be a bit of a head-scratcher, but hopefully, we’ve cleared the air on that. Remember, it’s all about what’s “on paper” versus “in your pocket.” If you have any more financial conundrums keeping you up at night, feel free to drop by again. We’ve always got a pot of coffee brewing and are happy to chat money matters with you. Thanks for reading, and see you next time!