The obligation your future self is owed
A pension does not ask "how big is my pot" — it asks "what is the present value of every payment I have promised," then funds that liability to the dollar. Your retirement is the same instrument turned inward: the capital you need today is the discounted present value of an inflation-adjusted spending stream stretched across a multi-decade obligation, and whether you are funded is simply whether your assets cover that liability.
The headline number is not a savings goal plucked from a rule of thumb — it is a liability valuation. Each future year of spending grows with inflation, then is discounted back to today at your expected return; sum those discounted draws and you have the exact capital that, invested, would service the promise to the last month. Raising the return rate lowers the obligation because tomorrow's dollars are worth less to a portfolio that compounds faster; raising inflation or duration lifts it because the promise itself grows.
The funded ratio is the only verdict that matters. Above 1.0× your assets over-cover the liability and the surplus is genuine slack; below 1.0× you carry an unfunded obligation, and the levers that close it are the same two a plan sponsor reaches for — a higher assumed return or a shorter horizon. Slide your projected assets across the 1.0× line and watch the verdict, and its remedy, flip.
Model assumptions, all adjustable above: spending is a level real stream indexed to inflation; the discount rate equals the expected nominal return, compounded monthly; the drawdown earns that same return on the balance net of each month's draw; taxes, sequence risk, and longevity uncertainty are abstracted away. This is a teaching instrument, not financial advice.