Month: October 2025

There are numerous factors that come into play when it comes to retirement, from daily expenses to the accounts that fund your future plans. Viewing all these elements in one place can reduce confusion and spotlight what truly matters. A concise balance sheet offers this unified perspective by capturing your current financial snapshot.

This blog walks you through creating your unique retirement balance sheet, exploring both its financial and emotional benefits while pointing out common mistakes to avoid. You’ll also find answers to frequently asked questions and information on where to get help if you need expert guidance.

Why a Retirement Balance Sheet Matters

Many people think of a “balance sheet” as strictly for businesses, yet it can also meaningfully impact personal finances. A retirement balance sheet gathers all of your retirement accounts, savings, and debts into a single document, allowing you to compare what you own to what you owe at a glance. This snapshot of your net worth can guide everyday decisions and keep you organized.

Another reason this approach matters is the control it provides. Without a central list, retirees may lose track of older accounts or hold too much cash in places with a low interest rate. That makes it tougher to manage certain debts or decide whether to shift money around. By unifying each piece of your finances, you create order and reduce stress.

Breaking Down the Components of a Retirement Balance Sheet

Creating or updating your retirement balance sheet doesn’t have to be complicated. Keeping a few key elements in mind will help you create a document that is both accurate and easy to reference. The components below can provide a clear snapshot of where you stand.

Assets

This category covers everything with economic value, including checking and savings accounts, IRAs, 401(k)s, brokerage accounts, real estate, and any investment portfolio that could generate retirement income during your years of retirement.

You may also choose to include certain “specialty” accounts here. For example, health savings accounts (HSAs) can be used to pay qualified medical expenses—potentially tax-free—during retirement. They can also cover non-qualified medical expenses after you turn 65 without incurring a penalty, though any amounts taken out will be taxed as ordinary income. Given that healthcare costs can escalate with age, seeing your HSA balance alongside other assets can help with future planning.

A good rule of thumb for personal property is to include only items that could realistically be sold for more than $5,000. This might consist of larger collectibles or valuable art. By doing this, your balance sheet doesn’t get cluttered with everyday possessions like a couch or TV.

Always use realistic market values rather than guesses, and note whether each account is taxable, tax-deferred, or tax-free. That way, you can plan how to distribute your retirement assets in line with your broader retirement strategies.

Liabilities

When it comes to liabilities, list your mortgages, car loans, credit card balances, or any other unpaid debts. Include the payment schedule, remaining balances, and the interest rate for each.

Some retirees keep a mortgage on purpose if the interest rate is low enough to make other investments more attractive, while others choose to pay it off for peace of mind. In either case, outlining these liabilities helps you decide how to handle them over the long term.

Net Worth

Once you’ve listed all assets and liabilities, subtract the total you owe from the total you own, and you’ll have your net worth. This number is a basic measure of wealth, especially once you factor in how much is quickly accessible (liquid), versus how much is tied up in real estate or other less liquid items.

It’s important to understand that this figure doesn’t define your retirement success. That said, it can serve as a baseline for how you might distribute or invest your retirement assets over time.

Best Practices for Creating or Updating Your Balance Sheet

Updating or creating a retirement balance sheet doesn’t have to be complicated. However, there are a few guidelines to remember so that your final document is accurate and easy to reference.

Consistent Updates and Realistic Figures

Plan to review your balance sheet each year to reflect any financial shifts. Some people pick an important date—like a birthday or the start of the new year – to pencil in new figures. Retirement finances can shift faster than expected, whether you’re opening new accounts, selling property, or paying down debt more quickly. An annual review keeps your numbers fresh and prompts you to spot any new developments.

Also, use realistic valuations for your assets. While you may think your home is worth a particular amount, your estimate might be higher than market reality. The same is true for collectibles or artwork: getting a professional appraisal could be beneficial if you’re unsure of actual worth. This approach helps avoid unintentionally inflating (or understating) your balance sheet.

Key Separations and Proper Labeling

Avoid mixing day-to-day income and expenses with your asset and liability totals. A balance sheet is meant to capture net worth at a single point in time rather than track ongoing cash flow. Maintaining a separate budget or cash-flow statement can help you manage monthly finances without distorting your overall snapshot. Generally speaking, a balance sheet compares what you own to what you owe.

Finally, label ownership carefully. If you hold assets in a trust or jointly with a spouse, ensure it’s documented. Retirement can bring significant estate-planning considerations, and you want to be clear on who officially owns what. A well-organized balance sheet helps settle matters more quickly should anything happen to you or a spouse.

It may also be helpful to note beneficiary designations for each account (especially retirement accounts). While your will or trust might outline certain wishes, the beneficiary listed on an IRA, 401(k), or life insurance policy typically supersedes what’s in your will. Confirming this information in your balance sheet can avert future confusion.

Benefits of Maintaining an Updated Retirement Balance Sheet

Maintaining an updated balance sheet offers several advantages that can enhance your retirement plan. Here are a few ways this document can help maintain stability and growth over the course of your golden years:

Smarter Financial Decision-Making: When you see exactly which accounts you have and how they fit together, you’ll be better equipped to make decisions about your retirement investment portfolio or personal debts. For example, you may realize you have three different 401(k)s from old employers that could be merged for more efficiency. Or maybe your holdings are too conservative or too aggressive. A balance sheet keeps it transparent, so it’s easier to adjust.

Improved Cash Management: Some retirees discover they hold far more cash than they realized, spread out in multiple bank accounts earning minimal interest. By pinpointing these positions, you can move extra funds to a higher-yield option or decide to invest them based on how you’re planning for retirement. Even a difference of two or three percentage points can have an enormous impact over many years.

Identifying Red Flags: Sometimes, retirees uncover old retirement strategies or outdated accounts that were forgotten. You might also notice mismatches in titling—maybe you have a joint brokerage account that should have been titled in a trust or an old 401(k) lacking a designated beneficiary. The balance sheet can be the prompt to fix those oversights before they cause chaos. In rarer cases, you might stumble across a high-interest debt that needs attention right away.

Enhances Tax and Estate Planning: A thorough balance sheet benefits your conversations with tax professionals and estate attorneys. It can help with decisions around Roth conversions, for instance, if you see you have significant amounts in pre-tax accounts. You might also realize certain assets that should be retitled to reduce taxes or to pass directly to heirs.

Tracking Financial Progress: As the years pass, you can compare each new version of your balance sheet to older ones. It can be a confidence booster if your net worth is rising or staying stable. If it’s dropping faster than anticipated, you can look deeper into the reasons—maybe your spending is higher, or your investment returns are lower than expected. This annual review can highlight areas to work on so your plan remains steady over your retirement years.

Additional Emotional and Psychological Benefits

Maintaining an updated balance sheet can lead to greater clarity and less stress at home. When your financial picture is organized, the mental load often feels lighter. There are many emotional and psychological benefits, including:

Overall Peace of Mind: Money questions can cause tension, especially if you’re unsure how much you’ve saved. With a well-organized balance sheet, you can see everything in one spot. It’s a simple way to reduce the background worries that might creep in when you’re unsure of your resources.

Improved Spousal Communication: Not every couple is equally engaged or informed about finances. A balance sheet gives both of you a single page to look at, making it easier to discuss the path forward. This practical tool can encourage open dialogue, minimize confusion, and promote healthier financial harmony.

Clarity in Your Goal-Setting: Planning any next step—travel, charitable giving, a new hobby—can feel more relaxed when you know where you stand. A balance sheet helps shape realistic objectives that match your actual resources. Whether you aim to leave an inheritance or spend more on experiences, you can lay out a plan without second-guessing how it fits your broader picture.

Confidence in Your Debt Strategy: If you keep a mortgage into retirement, you’ll know the exact principal balance and your monthly obligation. Seeing that in the context of your assets helps you decide whether it’s better to pay off the loan or hold on to your cash for flexibility. The same applies to car loans or home equity lines of credit (HELOCs). You can base your retirement income choices on facts, not assumptions.

Common Pitfalls to Avoid

Many retirees create a balance sheet once and then forget about it. Others overlook key details that can derail an otherwise solid plan. Here are a few pitfalls to watch for:

Failing to update during major life events: If you move to a new house, inherit money, or go through a divorce, your financial picture can change significantly. Failing to revise your balance sheet could mean missing out on smart choices—or discovering a problem too late.

“Best-Case” Valuations: Relying solely on “best-case” valuations—like your property’s top asking price or the most optimistic growth projection—can set you up for disappointment. Aim for realistic or even slightly conservative estimates so your plan remains solid under various market conditions.

Misclassifying Taxable vs. Tax-Deferred vs. Tax-Free Accounts: For retirement planning, it’s important to list which accounts are subject to current taxes (taxable), which are deferred (traditional IRAs/401(k)s), and which are tax-free (Roth IRAs). Mixing these can blur the real after-tax value of your retirement assets and cause confusion about required distributions.

Mistaking recurring income for balance sheet assets: A pension payout or Social Security check is monthly income, not an asset to list under personal property. This misunderstanding can inflate your net worth and lead to unrealistic assumptions about what you truly have.

Including Hypothetical Windfalls as Assets: Things like inheritances or potential lawsuit settlements might feel like “money in the bank,” but they’re not guaranteed or immediately accessible. Adding them to your balance sheet prematurely can give a false impression of security and lead to overspending or under-saving.

Ignoring inflation and potential growth when viewing a snapshot: A balance sheet shows your finances at a single moment in time. It doesn’t reflect what your savings or property values might look like five years from now, especially if you’re invested for growth. Keep that context in mind so you don’t make decisions purely on the current snapshot.

Frequently Asked Questions

Should you classify CDs as short-term or long-term assets?

Most retirees should list Certificates of Deposit as short-term assets on their balance sheet. While you might face a penalty for early withdrawal, you can still convert a CD to cash sooner than you could liquidate something like property.

Listing CDs under short-term assets also helps illustrate that these funds might be used for emergencies or near-term projects. It’s still good to track maturity dates, but if the question is, “Could I realistically get to that money within a reasonable window?” then a CD is more short-term.

Is it better to pay off your mortgage or keep it during retirement?

A mortgage might be manageable for some retirees if the interest rate is low. They might prefer to park extra cash in investments with the potential for higher returns.

Others feel better walking into their golden years without a monthly house payment. It truly depends on your personal numbers, including tax implications, if you’d be selling stocks or withdrawing from an IRA to pay off the debt.

How can you determine the actual values of different assets?

If you have a brokerage account, the value is whatever the most recent statement shows. A formal appraisal or a real estate comparative market analysis can be helpful for tangible assets like a house.

Real estate values can shift quite a bit based on local trends, so it’s good to have a ballpark figure you can trust. If you own collectibles, consider having them appraised if they’re worth more than a few thousand dollars.

We Can Help You with Your Retirement Balance Sheet

A personal balance sheet provides a snapshot of your retirement assets and liabilities. It’s an organized record of your financial standing, allowing you to see opportunities and potential concerns. With these details at your fingertips, you can make informed decisions about debt, taxes, and how you’ll spend your retirement years.

Even though a balance sheet is created for one point in time, it’s wise to update it regularly. The stock market fluctuates, property values shift, and personal circumstances can change more than expected. By treating your balance sheet as a living record, you avoid the pitfall of relying on outdated information.

If you’d like help creating or refreshing your balance sheet, our team of financial advisors can provide the personalized insights you need. We offer a full range of financial services—from helping you shape your investment portfolio to clarifying debt strategies—so that every asset and liability fits into your broader plan more effectively.
No one wants to be caught off guard when an account runs out of money in retirement. By staying proactive and keeping your information current, you’ll stay in control and face the future with more clarity. To learn how our team can help, we invite you to schedule a complimentary consultation and explore next steps for building a stable and confident retirement.

At Peterson Wealth Advisors, we often meet with prospective clients approximately 20 years prior to retirement. For many of them, the question that drove them to set up the consultation is: “Will I have enough saved?”

That question is much easier to answer when good habits were established decades earlier. This is why we invite our clients to share this article with their children and grandchildren in their 30s and 40s, or with any prospective clients who are still in the early to mid-stages of retirement planning.

Preparing for Retirement Checklist

Your actions in your accumulation years can set the stage for a secure retirement later. Here are six key areas to focus on:

 Save Early and Consistently

In retirement planning, time is your greatest asset. Money saved in your 30s and 40s has decades to grow and compound. Even modest contributions today can make a big difference in the long run.

If your employer offers a 401(k) or similar plan, contribute enough to capture the full company match—otherwise you’re leaving free money on the table. When possible, increase your contributions over time until you’re maxing out what you can reasonably afford. 

This is what we often refer to as the “art of accumulation.” Building wealth for retirement isn’t about hitting home runs — it’s about steady contributions and letting compounding interest work for you. (See our article on Are You Ready for a 30-Year Retirement?)

Use Retirement Accounts to Your Advantage

Tax-advantaged accounts like 401(k)s, IRAs, and even Health Savings Accounts (HSAs) can help accelerate retirement savings:

• 401(k)/403(b): Automatic contributions from your paycheck make saving effortless. Over time, gradually raise your percentage contributions when you get raises or bonuses.
• IRAs: If eligible, a Roth IRA as a supplementary source of saving is especially powerful in your 30s and 40s because your contributions grow tax-free for decades and withdrawals in retirement won’t be taxed.
• HSAs: If you’re in a high-deductible health plan, consider using an HSA not just for medical expenses but as an additional retirement savings tool.

We regularly help clients in their 50s and 60s restructure these accounts for income. But the best results come when saving starts early. For more, see our post on Year-End Financial Planning: What to Do Before December 31st.

Invest for Growth, Stay the Course

With decades until retirement, growth should be your primary investment goal. That usually means a healthy allocation to stocks. While stocks are more volatile than bonds or cash, they’ve historically outpaced inflation and provided the returns needed for wealth building.

We generally recommend shifting gradually from stocks to bonds as you approach retirement. This helps reduce risk while still giving your money a chance to grow. 

At retirement: Aim for about 60% stocks / 40% bonds.

Five years before retirement: Step down to roughly 70% stocks / 30% bonds.

Ten years before retirement: Step down again to around 80% stocks / 20% bonds.

More than ten years out: You can be anywhere from 90% stocks / 10% bonds to nearly all equities, depending on your risk tolerance and goals.

The general pattern is: For each 5-year increment as you approach retirement, move about 10% out of stocks and into conservative investments.

We’ve written before about the dangers of trying to time the market. The truth is, the market cannot be reliably timed. Those who stick with a diversified, long-term strategy almost always fare better than those who jump in and out based on current events. In 2020, for example, the COVID downturn spooked many investors. Those who pulled out of the market missed the rebound, while those who stayed invested saw their portfolios recover. 

As we tell clients: focus on the long game, not the daily noise. (See our article on Investing Lessons Learned from 2020).

Avoid Lifestyle Inflation and Manage Debt

Your 30s and 40s are often prime earning years, but they’re also years of increasing expenses: homes, kids, cars, and more. It’s easy to let your spending rise with your income, a trap known as lifestyle inflation.

The key is to live below your means. Use pay increases as opportunities to boost your savings rate, not just your spending. Just last week, a client told us that his most invaluable piece of advice for a younger investor is to begin contributing 10% of your salary to savings at the beginning of your career, and continually increase that percentage each time you get a raise. 

At the same time, minimize high-interest debt. A mortgage or student loan may be manageable, but credit card balances and other high-rate loans can quickly erode your financial progress. 

Remember: compound interest works for you when you’re investing, but against you when you’re paying 18% on credit card debt.

Protect Your Financial Foundation

We’ve seen firsthand that even the best-laid retirement plans can be derailed by unexpected events. Protect your progress by:

• Maintaining an emergency fund of 3-6 months’ expenses.
• Carrying adequate insurance: health, auto, homeowners/renters, and life insurance if your family depends on your income.
• Reviewing disability coverage to ensure you could still meet obligations if you couldn’t work.

Insurance and emergency savings may not feel as exciting as investing, but they form the safety net that keeps your retirement plan on track. (Though written for retirees, some of the principles from our related blog The Role an Emergency Fund Plays for Retirees can apply). 

Set a Financial Goal and Track Your Progress

It’s hard to know if you’re on pace for retirement if you haven’t defined what “enough” looks like. A common benchmark is the “25x rule”: save about 25 times your desired annual retirement income.

This isn’t a perfect formula, but it’s a good starting point. We often work with clients in their 50s and 60s to refine these numbers into a detailed income plan. The earlier you set a target, the easier it is to measure your progress and adjust.

For ideas on building your long-term plan, watch this video on the Perennial Income Model and understand how it may work for you.

Why is it Important to Start Saving for Retirement Early?

If you’re in your accumulation years, the message is simple: the choices you make today matter. Saving early, investing for growth, avoiding debt, and protecting your financial foundation will pay dividends for decades to come.

If you’re a retiree reading this, consider sharing it with your children or grandchildren. Helping them establish good habits now may be one of the greatest gifts you can give.

Peterson Wealth Advisors can Help Craft a Lasting Income Plan

At Peterson Wealth Advisors, we specialize in helping retirees create secure, lasting income plans. That being said, we also believe financial confidence starts decades before retirement.

If you or your children want to understand whether you’re on the right track, we’re here to help. Our team can review your current savings, provide a clear projection, and offer strategies to strengthen your plan.

Contact us today to start building a future that you and your family can count on.