What net worth do you need to retire?

When you’re thinking save for retirement, calculating your net worth can be a useful tool. It can help you evaluate your current situation, set goals and budget for retirement. “Net worth is your whole picture. It shows and tells you what you owe and what you own and how much money you really have,” said Pam Krueger, founder and CEO of Wealthramp in Tiburon, California. Read on to learn how to find your current net worth, what net worth to have in retirement, and additional factors to consider when planning your financial future.

[Read: Are Your Retirement Savings Ahead of the Curve?]

How to calculate your net worth

Your net worth looks at the total value of your assets by taking into account what you own and subtracting your liabilities. “Like a business, you add up the value of all your assets, subtract your liabilities, and hopefully the net income is positive,” Krueger says. Start by adding up the value of all your assets, such as cash accounts, stocks, bonds, retirement accounts, and the value of your home. “Don’t include smaller items that are difficult to convert into cash, such as clothing,” Krueger says. Then go to debts and find the total amount you owe on your mortgage, car loans, credit cards, student loans and other loans. Subtract total debt from total assets to find your net worth.

There are several ways to go through the calculation process. You can write it all down yourself with pen and paper or record it in a spreadsheet, or there are apps and online calculators that can help you find and track your net worth.

[READ: Can You Retire on $1 Million? Here’s How Far It Will Go.]

Determine your retirement needs

If you want to set a retirement net worth, the amount you use should fit your lifestyle and limits. “There is no one-size-fits-all number for how much money you need in retirement,” said Anthony Pellegrino, a fiduciary adviser and founder of Goldstone Financial Group in Oakbrook Terrace, Illinois.

To get started, see how much you plan to pay spend in retirement. You can estimate the annual amount you will need to have available to pay all your regular bills. For example, you can include costs for housing, utilities, travel, food, and entertainment. You may then decide that you want $60,000 per year during your retirement to cover living expenses. If you plan on traveling a lot, spend the winters in warm locations or take up other hobbies like fern, it can affect how much you need. You might decide that on $80,000 or $100,000 a year, you can live your favorite lifestyle.

Net Worth at Retirement

After calculating your current net worth, you may decide to update it periodically, such as once a year, to track your financial progress. If you pay off debt, increase your salary, or add up your savings, the amount can increase. As your net worth increases, you may be motivated to set further goals. For example, if your net worth is $100,000 the first time you calculate it, you can look for ways to increase it to $125,000 and then $150,000. “Think of your net worth as a ‘snapshot’ because it captures the bottom line of where you really stand on paper,” Krueger says.

When you look at your retirement assets, the calculations change slightly. Your net worth evaluates your overall net worth, but your retirement income will typically come from your most liquid assets. So when you look at your available resources for retirement expenses, focus on assets such as cash, stocks, bonds, mutual funds, and retirement accounts to see how your cash flow will be generated.

A general rule of thumb used for retirement planning is known as the 4% rule. “This refers to the amount of money a retiree must withdraw from a retirement account each year,” Pellegrino says. “If someone retires with $2 million in cash and spends 4% each year, that equates to $80,000 a year in income.”

[Read: What Happens to Your 401(k) When You Leave Your Job.]

Spending your net worth on pension

Once you’ve reached the net worth you need to retire, it’s still wise to stay budget-friendly. “While high net worth in assets may mean someone is more comfortable in retirement, those assets may not last a lifetime if their lifestyle and withdrawals are too high,” said Andrew Bernstein, wealth management advisor at All Points Wealth Management, a Northwestern Mutual company, in Raleigh, North Carolina.

For example, if your net worth is $3 million and you spend $500,000 a year, you will run out of money quickly. “If you retire with a $1 million net worth, have no debt, and only need $60,000 a year to live, you could be more financially secure than the person with three times your net worth,” Pellegrino says. “It’s not just how much you have, it’s how much you spend.”