Liquid Net Worth

Liquid net worth narrows the net worth question from “what am I worth” to “what could I actually use.” Cash counts in full, taxable brokerage investments count in full, and retirement accounts count only after the haircut for early-withdrawal penalties and taxes, commonly 25 to 35 percent before age 59 and a half. Unsecured debts like student loans and card balances subtract in full, while a mortgage nets against the home it secures on the illiquid side.

The gap between liquid and total net worth is usually large, because home equity is most households’ biggest asset and none of it pays a bill until the house is sold or borrowed against. A household can be wealthy on paper and tight in practice; the liquid figure is the one that answers emergency and runway questions, which is why planners track both.