What does the net wealth formula include?

The net wealth formula provides a comprehensive view of an individual's financial situation by accounting for various components that contribute to overall wealth. The correct formulation encompasses human capital, which represents the value of an individual's skills, education, and earning potential, alongside investment assets that can be liquidated or utilized for generating income. It also includes future pension benefits, which are calculated values that anticipate the benefits an individual is expected to receive from pension plans upon retirement.

Moreover, this formula deducts liabilities, which are any debts or obligations that must be paid. By considering all these elements, the net wealth formula effectively reflects a person's financial health at a specific point in time. This complete approach allows for a more accurate assessment of financial stability and planning for future needs, distinguishing it from other options that focus solely on specific parts of wealth or income.