Use Your Client’s Funded Ratio to Simplify and Improve Retirement Planning Decisions

Abstract

This article shows investment advisors how to compute a funded ratio and, subsequently, how to use this metric to assess retirement readiness for individual clients. The funded ratio allows the advisor to measure the relative size of assets and liabilities of an individual’s retirement plan, providing an alternate perspective to that obtained from Monte Carlo simulation.

Upon discussing how to calculate and use a funded ratio, a simple graphic is presented and described to show advisors how to quickly determine if their clients are on track to retire given their current retirement plan.