Cash flow settings: understanding planning methods in RightCapital

RightCapital is a powerful tool, equipping you with the clarity needed to ensure your client’s retirement success. An important consideration is how to calculate cash flow at any given point.

RightCapital allows you to choose a Planning Method which analyzes inflows, outflows, savings, and goals to calculate a client’s cash flow. This Planning Method directly impacts the overall plan for the client. Specifically, the Cash Flows tab and the Analysis tab in the Retirement module are impacted.

System-wide setting

Set a system-wide default under ⚙ > Account > Client Presets.

Did you know?

Changing the Client Preset will only affect new client plans – all existing clients and client plans will be unaffected by any changes you make here.

To learn more, check out our article on Client Presets.

Client-specific setting

Second, you can change this setting on a per-client basis in the Advisor Portal in Clients > click on the client to whom you’d like to make changes > Settings > Planning Method. (You can switch planning methods freely without losing any data)

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There are three Planning Method options:

Traditional Cash Flow

The standard Cash Flow calculation is simple: Inflows minus Outflows equals Net Flows.This method assumes positive cash flow is saved in a taxable account. This is best used when:

  1. The client's expected inflows and outflows are known, but
  2. The client may not know what they expect to save; or
  3. When the client may be more likely to save than spend.

Modified Cash Flow

Modified Cash Flow is similar but assumes any excess cash flow is spent (not saved). This is selected by default. This method is best used when:

  1. The client's level of expenses is less understood (by the client), but
  2. The client’s income and saving are known, or
  3. When the client may be more likely to spend than save.

Please note, when using Modified Cash Flow, the following will automatically be saved and not spent: RMDs, manual distributions (added within the Profile > Income tab), Inheritance Income and any proceeds from the sale of real estate or a Business.

Goal Based

This method ignores income and expenses and instead looks only to goals, savings, and account information to sketch up a rough picture of retirement. Using this method only requires:

  1. The client's level of savings,
  2. The client’s retirement spending goal, and
  3. Key financial goals.

Note

Goals-Based Cash Flow method is not recommended if you wish to use other tools besides the Retirement Projection for a client.

For detailed information on how these methods impact the Cash Flows tab in the Retirement module, check out our article, Understanding the Cash Flow Table.