Data Entry: Individual Client Methodology

Adjusting Client-Specific Settings

RightCapital is designed to achieve financial planning, done just right. You are always in control of the advising philosophy and the underlying assumptions involved. You have complete control over each and every client's planning methodology, providing a platform for world-class, personally tailored advising.

There are numerous settings that are adjusted for each client to tailor the individual planning approach. This article outlines how to make changes on a client-by-client basis.

To access these settings, open a client's financial plan > select the Gear Icon > select Settings > Methodology tab.


Looking for global settings?

To make changes that affect all new clients, read the article on creating system-wide global presets.

Planning method

The default setting is  Modified cash flow based.

The planning method indicates how RightCapital handles the surplus or shortage of cash flow in any given year. To learn more about planning methods and the impact on a client plan, read the article on understanding planning methods as well as the article on cash flows.

Cash flow in simulation starts

The default setting is Current month.

This setting determines the timing of the cash flow projections, whether you use a rolling 12-month projection or illustrate a calendar-year based projection starting at the beginning of the current year or the next year.  See additional details on cash flow timing options.

Allocation method

The default setting for allocation method is Same asset allocation for all years. When using the default setting the client's specified asset allocation, entered in the Profile > Net Worth area, will remain constant throughout the life of the plan.

The second choice in the dropdown menu will be Pre and post-retirement asset allocation models. When using this option the current plan will use existing investments entered into the Profile >Net Worth area to determine the pre-retirement asset allocation. An additional dropdown menu will appear, under the allocation method, to set the post-retirement allocation for the current plan. This setting allows also allows users to specify pre-retirement and post-retirement asset allocation models for proposed plans, in the Retirement > Analysis > Action Items area.

New asset allocation models can be created in the Advisor Portal > Models Tab > Portfolios area to be used in all client plans.

The third choice is a default, or customized, glide path for each client. If a glide path is enabled, the client's investment allocation will slowly migrate to the glide path allocation over the specified number of years. See additional details about glide paths.

If you choose to uncheck the "Rebalance across account types for current allocation" setting the allocation method will use Same asset allocation for all years by default.

Planned distribution method

This setting determines how manual distributions interact with Required Minimum Distributions (RMDs) calculated automatically by the system. Options include having the manual distributions added to the RMDs, having the system calculate the greater of the manual distributions and RMDs, or overriding the system's RMD calculation to just use the manual distributions. This setting applies across all account types.

RMD added to manual distribution is the default; in this  case, RightCapital  will add the amount of any inputted distributions to the calculated RMD amount.

Greater of RMD and manual distribution means that if the RMD calculated is greater than the distribution entered, RightCapital will use the RMD amount;  otherwise  the inputted distribution will just distribute the amount indicated.

No RMD, manual distribution only means that RightCapital will not automatically calculate the RMD and will only use the inputted distributions.

For more, see the article on income distributions.

Cash management method

This setting determines how cash in bank accounts is projected in the cash flow and Monte Carlo projections.  You can either use cash reserve goals to illustrate investing cash or managing cash balances over time, or you can allow bank account balances to be treated as cash, and liquidate them either before or after taxable investments.  For more information, please see the detailed article on cash management.

Health Savings Account distributions

This setting determines when the system will start using Health Savings Account (HSA) assets to fund medical expenses. The following options will help you customize automatic HSA distributions in RightCapital:

  • Start to fund medical expenses immediately: HSA assets will accumulate until the first medical expense takes place in future cash flows.
  • Start to fund medical expenses at first retirement: HSA assets will accumulate until the year the first client / co-client retires. At that point, the HSA will automatically distribute to cover medical expenses.
  • Start to fund medical expenses at second retirement: HSA assets will accumulate until both clients retire.  At that point, HSA's will automatically distribute to cover medical expenses. If there is only one client (no co-client), you should select either funding expenses immediately, at client's age, at a calendar year, or at first retirement, since there is no second retirement.
  • Start to fund medical expenses at client's or co-client's age: HSA assets will accumulate until the specified client's age. At that point, the HSA will automatically distribute to cover medical expenses.
  • Start to fund medical expenses in calendar year: HSA assets will accumulate until a specific calendar year. At that point, the HSA will automatically distribute to cover medical expenses.

Include bank accounts in investment allocation

This setting includes cash held in bank accounts to the asset allocation mix (typically displaying an overall higher percentage of assets held in cash). Bank account values are added to Investment values for a combined allocation chart on  Client Portal > Investment > Asset Allocation.

Use taxable account to fund IRA and 529 saving when current year cash flow is inadequate

This setting will automatically calculate withdraws (and taxes) from a taxable investment account to maintain savings goals in non-taxable accounts in years when other income sources are unable to meet the specified savings goal.

If this setting is unchecked, RightCapital will only fund contributions to IRA, Roth IRA, and 529 accounts from cash flows. If there are insufficient cash flows in any year RightCapital will not reflect the contributions in that year.

If the setting is checked, RightCapital will first fund those contributions from cash flows; if there are insufficient cash flows in any year RightCapital will then look to fund those contributions from the value in taxable accounts. If there is no available money in taxable accounts, RightCapital will not reflect the contributions in that year.

Rebalance across account type for current allocation

This setting will automatically calculate a shift in assets from a client's current values to such values that will align with the current investment allocation breakdown.

If checked, RightCapital will use the rate of return associated with the overall current allocation for each investment type (e.g. taxable account, IRA, etc.) when calculating the projections using the client's current allocation.

If unchecked, each investment type will grow using the returns associated with the current allocation for that investment type only. Additionally, when this setting is unchecked the Allocation Method setting will be impacted. You will not be able to propose a new asset allocation model as RightCapital will always use the current allocation for each investment type.

Take annuity RMD from IRA accounts first

This setting, if checked, allows you to delay taking withdrawals from qualified annuities with a lifetime income guarantee ( set up with a distribution type of 'Lifetime Income') by satisfying the annuity's Required Minimum Distributions (RMD) from the client's traditional IRA accounts or other qualified annuities.  This allows for clients to delay withdrawals on the lifetime income annuity in order to provide a higher guaranteed income amount in future cash flows.

If the setting is unchecked, we will calculate the RMD for lifetime income annuities each year starting in the year the client turns 72, and will distribute the greater of the RMD or the client's lifetime income amount in that year.

Also, if this setting is checked, once the client has started taking lifetime income withdrawals if the client's RMD exceeds the lifetime income amount we will take the excess from the client's IRA or other qualified annuities.

Note: only use this setting if your client has sufficient funds in their IRA or other qualified annuity to cover the additional RMDs.  If there is insufficient funds in their IRA or qualified annuity to cover the additional RMDs, the client's RMDs will be understated as we will not take the balance from the annuity.

Whether the setting is checked or not, once lifetime income withdrawals begin, those withdrawals will count towards the total RMD required across your clients' IRA and qualified annuity accounts.  If the lifetime income amount exceeds the RMD calculated for the lifetime annuity, we will reduce the RMD from the client's traditional IRA by the excess amount.

Spend unsaved RMD's (Modified Cash Flow only)

If you wish to have RMDs, and any manual distributions, automatically spent rather than saved, check the 'Spend unsaved RMD's box in the client settings. When checked this setting will automatically spend excess income from Required Minimum Distributions that is not used for expenses or goals in a specific year. Spent RMD's are can be seen in the Retirement> Cash Flows > Summary > "Spent unsaved cash flows" column.

If unchecked, excess RMD income will be saved and reinvested into the taxable bucket of assets. This setting will only display on the Advisor Portal > Client Settings tab if a Modified Cash Flow Based Planning Method is selected.

Include Taxable Saving in Planned Saving column (Modified Cash Flow only)

When using the Modified Cash Flow planning method, this setting will display taxable savings in the Retirement > Cash Flows > Summary tab under "Planned Savings" column. This will not change any calculations, but it will alter the display. Instead of showing the taxable savings in the "Net Cash Flows" column, they will appear in the "Planned Saving" column. This setting will only display on the Advisor Portal > Client Settings tab if a Modified Cash Flow Based Planning Method is selected.

Distribute investment income from Taxable account after retirement

This setting allows users to distribute investment income (interest + dividends) from taxable accounts at designated times within the plan. When enabled, investment income will display in the Cash Flows section under the Income Inflows column. Distribution of investment income can begin after the first client retires, every year, or never.

Allow display of scenario-specific cash flows

As a default, scenario-specific cash flows will not be displayed in the financial plan.

Advisors will have the flexibility to illustrate specific return scenarios in the cash flow tables. The cash flows automatically display a static/baseline investment return each year. When this setting is turned on, users can view the impact of varying return scenarios in the cash flow projections by adjusting the "baseline" dropdown menu. Customized return sequences can be added by the advisor in the Advisor Portal > Models > Scenarios tab.