A single threshold above the poverty line offers an appealing way to classify households as poor, vulnerable, or economically secure. This paper shows that, when vulnerability is defined as expected poverty, applying a common vulnerability threshold to observed consumption faces two problems. First, a vulnerability threshold may lie below the poverty line or may not exist. Second, households with the same current consumption may face very different risks of future poverty, implying household-specific vulnerability thresholds. We establish necessary and sufficient conditions for the existence of these thresholds and show that applying appropriate risk deflators to household consumption allows a common vulnerability threshold to be used on the risk-adjusted consumption scale. We then discuss three approaches to setting this common threshold and examine the consequences of leaving consumption unadjusted for risk. In our Malawi illustration for 2024–25, failing to adjust consumption for household-specific risks leads to the misclassification of 16–22 percent of the population.
 

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