Michael BooneOn a personal planning basis, when we think of saving for retirement we think of a small amount of money that builds and builds to a large amount which is finally withdrawn from in retirement years.  But we seldom talk about the other side of the equation: what economists call human or individual capital. 

For our purposes, it is the potential economic receipts earned over the period of a lifetime.  This number goes up with education and training, but goes down as we spend down our individual capital accounts by aging and thus losing future productive years.  This is one aspect of the eternal battle between time and money. 

Three thoughts about this:

1.       Young people may not have much money, but they probably have a lot of time. Investing that time in education, experience and training can yield great returns in individual capital.

2.       Our most valuable financial asset is often not anywhere on our Net Worth Statement.  It is our potential for future earnings. If we squander this diminishing asset we will find ourselves with little in financial assets to show for the trade and no chance to go back and do it again. 

3.       How much individual capital do you want to leave unspent when you retire?  Is reaching the point when you have enough in your retirement account your sign that you must retire, or is a look at your individual capital account balance worthwhile, too?