Low serum ferritin is diagnostic of iron deficiency, yet its published lower cut-off values are highly variable, particularly for pediatric populations. Lower cut-off values are commonly reported as 2.5th percentiles, and is based on the variation of ferritin values in the population. Our objective was to determine whether a functional approach based on iron deficient erythropoiesis could provide a better alternative. Utilizing 64,443 ferritin test results from pediatric electronic health records, we conducted various statistical techniques to derive 2.5th percentiles, and also derived functional reference limits through the association between ferritin and erythrocyte parameters: hemoglobin, mean corpuscular volume, mean cell hemoglobin concentration, and red cell distribution width. We find that lower limits of reference intervals derived as centiles are too low for clinical interpretation. Functional limits indicate iron deficiency anemia starts to occur when ferritin levels reach 10 µg/L, and are largely similar between genders and age groups. In comparison, centiles (2.5%) presented with lower limits overall, with varying levels depending on age and gender. Functionally-derived limits better reflects the underlying physiology of a patient, and may provide a basis for deriving a threshold related to treatment of iron deficiency and any other biomarker with functional outcomes.