Describe the term 'net worth.'

Net worth is defined as the total value of an individual's assets minus their liabilities. This concept provides a clear picture of an individual's financial situation at a specific point in time. When calculating net worth, assets include items such as cash, investments, real estate, and personal property, while liabilities encompass debts like mortgages, loans, and credit card balances. Therefore, net worth essentially shows what an individual owns outright after accounting for what they owe.

This metric is crucial for understanding overall financial health, as a positive net worth indicates that assets exceed liabilities, suggesting a level of financial stability and security. Conversely, a negative net worth reveals that liabilities surpass assets, which could signal financial challenges.

In contrast to the other choices, the total income earned over a lifetime merely reflects earnings without including the asset and liability components. The amount saved in a retirement account represents only one area of financial assets and does not provide a comprehensive view of total assets and liabilities. Lastly, while net worth can act as a measure of financial stability, the definition specifically focuses on the calculation rather than the broader interpretation of financial health.