Retirement Spending Strategies - RightCapital Help Center

RightCapital understands that not every client will draw on their assets in the same way. This is why we offer the ability to utilize dynamic spending strategies, to adjust how clients draw down on their assets in retirement. These retirement spending strategies can be customized based on client behavior or market performance.

Retirement spending strategies can be seen and customized for use in the Advisor Portal > Models > Retirement Spending tab. Once entered within the Advisor Portal, spending strategies can be used in each client plan. Spending strategies can be enabled within the Current Plan via the Retirement Expense card in the Profile > Goals tab (or Step 6 of the initial data entry). They can also be enabled for a Proposed Plan via the Action Items in the Retirement Analysis tab.

Default Spending Strategies

RightCapital includes five "default "spending strategies, which are pre-built into every advisor account. These can be found on the left-hand side of the Advisor Portal > Models > Retirement Spending tab. You are free to adjust the rules and parameters for each of the default strategies as you see fit:

Inflation Adjusted:

Spending at retirement will be adjusted with general inflation each year. This is tied to your global assumption for general inflation. By default, general inflation is 2.5%.

Inflation Adjusted is the default setting for retirement expenses within the Profile > Goals > Retirement Expense card.

Retirement Spending Smile:

Retirement expenses will be adjusted by your general inflation rate, minus a specified % reduction. By default, the additional reduction is 1%.

Retirement Spending Stages:

Retirement is split into three stages; spending will be reduced by a specified % during each stage. The default stages are as follows:

Floor and Ceiling:

Retirement spending will fluctuate with market performance, reflecting a consistent retirement expense rate within a specified corridor. Spending will be reduced in years of down markets, but no lower than the specified floor. In years of strong markets, spending will be increased, but no higher than the specified ceiling. The default floor and ceiling are as follows:

Guardrails:

Retirement spending will fluctuate with market performance for a specified timeframe. The guardrails strategy is used to adjust retirement spending based on withdrawal rates from invested assets during a specified time frame. This strategy allows you to set "capital preservation" and "prosperity" rules during this time frame, which act as the guardrails. The default parameters for these rules are as follows:

Additional rules allows you to override the client's initial withdrawal rate with a specified withdrawal rate, and prevent an inflation adjustment on retirement expenses if the previous year's return is zero or negative.

For more detailed information and background on each of these retirement spending strategies, please see our article on Strategy Type Details.

Adding New Spending Strategies

In addition to the default spending strategies, advisors can also create their own custom spending strategies in the Models > Retirement Spending tab. To create a new spending strategy, click "Add Spending Strategy" on the left. After being created, the new strategy can be renamed by clicking the "..." icon to the right of the name:

You can also make a copy of an existing model by hovering over a model, and clicking the copy icon to the right of the model name:

After adding a spending strategy, you can use the ''Strategy type' field to determine which of the default strategies you would like to use as the basis for your new strategy. The rules and parameters for your custom strategy will change depending on your chosen option:

You are free to adjust the parameters for your custom spending strategy as you see fit. After dialing in your parameters, click the blue Save button in the lower right.

Re-order Spending Strategies

When viewing the list of your spending strategies, RightCapital allows you to change the order they are displayed. Within the list of strategies on the left, you can click on the title of one of the strategies and then drag it to the desired location.

Delete Spending Strategies

Spending strategies can be deleted by hovering your mouse over a particular strategy, and then clicking the 'x' icon that appears to the right:

Where to Apply Spending Strategies

Retirement spending strategies can be leveraged in two different places within each client plan. To implement a spending strategy as part of a client's Current Plan navigate to the Profile > Goals tab, open the Retirement Expense card, and select your desired spending strategy:

To implement a spending strategy as part of a client's Proposed Plan, navigate to the Retirement > Analysis tab and open the Action Items at the bottom of the page. Locate the 'Retirement Spending' strategy in the right-hand column, and select your desired spending strategy: