TL;DR. The funded ratio is the solvency test a pension fund runs on itself, applied to your household. It compares everything you have (current balances plus the present value of future income like paychecks, Social Security, and pensions) against everything you plan to spend, with both sides discounted at a conservative real interest rate. It answers one question the success rate cannot: does this plan need the market at all? A ratio of 1.0 or higher means no; below 1.0, the plan depends on markets outperforming that riskless rate, and the gap is how much you are asking them to earn.

How it is computed

All math is in today's dollars. Each future cash flow in year y is divided by (1 + r)^y, where r is the real discount rate you pick with the slider (default 2%, a TIPS-like real yield). Assets are your current account balances plus the discounted value of every income event on your plan. Liabilities are your base spending, held flat in real dollars over the plan's horizon, plus every spending event. The ratio is assets divided by liabilities: 1.31 means a 31% surplus, 0.93 means the plan is 93% funded.

Because the computation is closed-form, dragging the discount-rate slider recomputes it instantly. No simulation runs.

Funded Ratio vs. Success Rate

Success rate answers "in what fraction of historical paths did this plan survive?" It is a probability built from market history. The funded ratio answers a different question: "at a locked-in riskless real rate, is the plan solvent today?" It is a magnitude, not a probability. Two plans can both show 95% success while one has a funded ratio of 1.4 and the other 0.85: the first does not need markets to cooperate, the second is betting on them and has mostly been winning the bet in history. Showing both is the point: the success rate tells you how often markets bailed the plan out, the funded ratio tells you whether the plan needs bailing out at all.

The point-in-time view

The year-by-year analysis shows the funded ratio at the start of each year of the selected simulated history: that year's balance plus the remaining income, over the remaining spending, at the same discount rate you set on the Funded Ratio card. The gear on that badge opens the full breakdown scoped to the selected year, so the badge and the breakdown always agree; the headline Funded Ratio next to the success rate stays anchored to today. It is a hindsight reading, conditional on the path shown, and it is where sequence risk becomes visible: a cohort that retires into a crash watches the ratio dive below 1.0 early and never recover, while a luckier start year sails upward. The trend matters more than any single year's level.

Before retirement vs. in retirement

The formula is identical in both cases; what changes is what lands on each side. Year zero is always today, not retirement day.

Already retired: every year is a retirement-spending year. Assets are today's balances plus whatever income remains; liabilities are your spending plan held flat in real dollars plus spending events. The ratio reads exactly as the pure statement: could I cash out into a bond ladder right now?

Retiring in the future: the years before retirement use whatever your working-years period spends on the liability side (nothing, if you have not added one), and your job income counts as an asset (the present value of future paychecks). Future saving does not need to be modeled separately; it falls out of the arithmetic, since income above spending in the working years is surplus on the asset side. One caveat: for a future retiree, "no market risk needed" softens to "solvent assuming you keep earning as planned," because a paycheck is not a TIPS bond. A 45-year-old can show 1.1 mostly on the strength of twenty years of future salary. The margin is still meaningful, just conditional on the earning plan rather than purely on assets in hand.

Choosing the discount rate

Anchor on a real (after-inflation) yield you could actually lock in, like the yield on long-dated TIPS. A higher rate shrinks the present value of far-future spending faster than near-term income, so the ratio usually rises with the rate. Using an optimistic rate defeats the purpose: the funded ratio is useful precisely because it is conservative.

What is not included

A loan's scheduled payments, including a lump payoff in its payoff year, are liabilities; a forgiven balance is never paid, so it is not one. Real estate and HELOC events, property equity, and taxes are excluded from both sides. When your plan has any of these, the card shows a caveat line. Pre-tax balances (Traditional IRA, 401k) count at face value, so the ratio is optimistic for heavily pre-tax portfolios. Market-driven spending plans (percent of portfolio, guardrails) are represented by their initial amount or floor, held flat.