Client settings: cash management

Overview

RightCapital offers different multiple ways of projecting cash assets and other taxable investment assets as part of the cash flow and Monte Carlo projections.  Which setting you wish to use depends on how much control you wish to have over cash balances, how they are accumulated, and how they are spent.

You can always see the breakdown of taxable assets between the cash reserve and taxable investments by going to Retirement / Cash Flows / Accounts tab / Taxable:

Use cash reserve goal to manage cash levels

Use this setting if you wish to show clients the benefit of investing some or all of their existing cash balance, if you wish to illustrate accumulation of cash over time (e.g. for an emergency fund), or if you wish to show different levels of cash over time.  When using this setting:

  1. We will automatically invest all money in bank accounts and taxable investment accounts in the absence of a cash reserve goal

  2. Only amounts specified in cash reserve goals will be treated as cash, growing at the rate associated with the "Cash" asset class

  3. When liquidating assets to fund negative cash flows, taxable investment assets will be spent before cash reserve

See the Cash Reserve Goal page for details on how to set up Cash Reserve goals.

Treat bank account as cash, spend cash before taxable

Use this setting if amounts in client bank accounts are expected to be consistent over time and remain as cash, if you wish to illustrate draw-down of cash to fund a near-term expense, and/or if you wish to show cash being spent prior to taxable investments.  When using this setting:

  1. Any amount entered as a Bank account will be treated as cash.  You cannot increase the cash amount over time.

  2. The amount entered as a Bank account will grow using the rate associated with the "Cash" asset class

  3. When liquidating assets to fund negative cash flows, cash reserve will be spent before taxable investment assets.  For example, if a client has a large cash balance in a bank account that they plan to use as a down payment for a home in the near future, this would be a good setting to use, as we will automatically spend down the cash to fund that expense.  Note that all taxable assets, including taxable investments, will still be spent prior to tax deferred and tax free assets, unless you create a distribution.

Treat bank account as cash, spend cash after taxable

Use this setting if amounts in client bank accounts are expected to be consistent over time and remain as cash, if you wish to maintain a cash balance throughout the life of the plan, and/or if you wish to show taxable investments being spent before cash.  When using this setting:

  1. Any amount entered as a Bank account will be treated as cash.  You cannot increase the cash amount over time.

  2. The amount entered as a Bank account will grow using the rate associated with the "Cash" asset class

  3. When liquidating assets to fund negative cash flows, taxable investments will be spent before cash.  For example, if a client has an emergency fund in cash that you wish to maintain throughout the life of the plan, this would be a good setting to use.  Note that all taxable assets, including cash, will still be spent prior to tax deferred and tax free assets, unless you create a distribution..