Funded Ratio Calculator

| Added in Personal Finance

What is Funded Ratio and Why Should You Care?

The Funded Ratio measures how well your retirement assets cover your projected retirement spending needs. It provides a snapshot of your retirement readiness in a single percentage.

Understanding your funded ratio helps you make informed decisions about saving, spending, and retirement timing.

How to Calculate Funded Ratio

The formula for funded ratio is:

[\text{Funded Ratio} = \frac{\text{Total Assets}}{\text{Total Spending Needs}} \times 100]

Where:

  • Total Assets is your total retirement savings
  • Total Spending Needs is your estimated total retirement expenses

Calculation Example

Given:

  • Total Assets: $800,000
  • Total Spending Needs in Retirement: $100,000

Calculation:

[\text{Funded Ratio} = \frac{800{,}000}{100{,}000} \times 100 = 800%]

A funded ratio of 800% indicates strong retirement readiness with significant financial cushion.

Funded Ratio Interpretation

Ratio Assessment
< 50% Significant shortfall
50-80% Moderate shortfall
80-100% Nearly funded
100% Fully funded
> 100% Surplus cushion

Frequently Asked Questions

A funded ratio of at least 100 percent means your assets cover projected spending. Ratios above 100 percent provide a safety margin for unexpected expenses or market downturns.

Financial planners use funded ratio to assess retirement readiness, identify savings gaps, and help clients adjust their saving or spending strategies.

A ratio below 100 percent indicates a shortfall. Consider increasing savings, delaying retirement, reducing planned spending, or exploring additional income sources.

Review your funded ratio annually or after major life changes like job changes, inheritance, or shifts in retirement plans to ensure you stay on track.