First, let's use BobK's funded ratio definition:

The value of the portfolio is straight forward. The value of the liabilities is debatable, particularly the discount rate used to determine the liabilities. For the sake of illustration, I'm going to use the Daily Treasury Par Real Yield Curve Rates to determine the liability because they represent the risk-free real interest rates.

Now for the scenario. Let's assume we have a retiree who is 65 years old on Dec. 31, 2021 who needs $40K / year in real income until age 95. The present value of these cash flows is the liability. The real yield curve rates on Dec. 31, 2021 were:

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```
Date 5 YR 7 YR 10 YR 20 YR 30 YR
12/31/2021 -1.61 -1.31 -1.04 -0.63 -0.44
```

Let's assume the funded ratio on Dec. 31, 2021 was 100%, so the retiree had $1.4M in the Vanguard LifeStrategy Conservative Growth Fund.

So, at Dec. 31, 2021:

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```
Assets $1.4M
Liabilities $1.4M
Funded Ratio 100%
```

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```
Date 5 YR 7 YR 10 YR 20 YR 30 YR
11/18/2021 1.71 1.63 1.57 1.59 1.63
```

As noted above, the Vanguard LifeStrategy Conservative Growth Fund has lost about 17% YTD, so we have $1.1M in assets.

**However, the retiree's funded ratio is now approximately 120% - 20% higher than the beginning of year!**

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```
Assets $1.1M
Liabilities $0.9M
Funded Ratio 120%
```

=============

**Edit:**Watty noticed a gap in the calculations below. When determining the liability at Nov. 18, 2022 we need to adjust for inflation that has occurred during 2022. Here are the updated results after this adjustment:Code: Select all

```
Assets $1.1M
Liabilities $1.0M
Funded Ratio 110%
```

**The retiree's funded ratio is now approximately 110% - 10% higher than the beginning of year!**