As of the close of stock markets on April 8, 2025, the S&P 500 index was down about 15% from its close at the beginning of the year. It seems pretty clear that this decrease is primarily attributable to implementation of President Trump’s tariff policies. Whether the market’s decline will worsen or recover this year is uncertain. It is also uncertain what the impact of these policies will have on short-term or long-term inflation.
Generally, we encourage our readers to remeasure their Funded Status once a year at the beginning of the year. However, it may make sense to remeasure (or estimate) the household Funded Status during a year in which investment performance is significantly higher or lower than expected or in which a significant purchase or other financial decision is being considered by the household.
In this post, we will discuss how you can easily estimate the impact of the recent stock market decline on your beginning of year Funded Status and provide an example. Knowing the impact can possibly help you make better financial decisions during 2025.
Estimating your mid-year Funded Status
To estimate your mid-year Funded Status, you could simply go back to the Actuarial Financial Planner (AFP) spreadsheet and revise relevant input items that you entered at the beginning of the year. No need, however, to run 10,000 simulations to redetermine what your revised “probability of success” is.
To estimate the effect of recent stock market declines on your beginning-of-year calculated Funded Status without using the AFP, the process is even easier—simply estimate the loss on your equities incurred since the beginning of the year, subtract that amount from your beginning-of-year balance sheet assets and divide the result by your beginning-of-year balance sheet liabilities.
Estimated Mid-Year Funded Status = (Beginning of year total Assets – investment loss to date) / (Beginning of year total Liabilities)
For example, Bill and Susie’s household Funded Status at the beginning of 2025 was 120%, determined by dividing the total present value of their assets of $1,800,000 by the total present value of their spending liabilities of $1,500,000. As of April 8, they estimate their equity investments are about $60,000 lower than they were at the beginning of the year.
To estimate their April 8th Funded Status, they subtract $60,000 from their beginning of year assets of $1,800,000 and divide the result ($1,740,000) by their beginning of year spending liabilities of $1,500,000 to obtain an estimated April 8, 2025 Funded Status of 116%.
Bill and Susie are also worried about the short and long-term impact of the President’s tariff policy on general price inflation. To estimate this impact, they can change the current 3% per annum default assumption used in the spreadsheet and/or increase the assumed future increases of inputted expenses.
As time passes and the effects of significant tariffs on
prices become clearer, we will likely change the default inflation
assumption. In the meantime, households would be wise to stress test
their plans for higher levels of inflation or other risks such as
possible reductions in Social Security benefits.
