Global assumptions in RightCapital are used as a starting point whenever you create a new client plan. Within each plan, you can choose to use either your global assumptions, or a set of customized, household-specific assumptions.
Please be aware that making changes to your global assumptions may cause changes in the output of your client plans.
Asset Return Tab
Enter the interest/dividend and capital gain percentages for each asset class. This option provides the most flexibility, allowing you to manually customize your return percentages.
Assumptions based on 20 to 50 years of historical index return data. This is the default setting in RightCapital, and is updated on an annual basis.
Assumptions derived from JP Morgan's Long-Term Capital Market Assumptions report. These figures are updated on an annual basis.
For more details on the Historical and Forward-Looking assumption presets, please see our dedicated article on Asset Return Assumptions.
Asset return assumptions are a critical component of each and every financial plan, having an impact on tax calculations as well as future growth on invested assets. It is generally recommended to review and update your return assumptions periodically, to ensure robust projections and provide the most value to your clients.
Inflation Tab
Inflation Type | Description |
|---|---|
General inflation: | Adjusts living expenses and general goals. |
Health care cost inflation: | Adjusts health care / long-term care expenses and goals. |
Education cost inflation: | Adjusts pre-college and college goals. |
Social Security inflation: | Adjusts Social Security benefit amounts, PIA bend points, and taxable wage base. |
Tax inflation: | Adjusts taxable income brackets and retirement account contribution limits. |
You can also use the checkboxes at the bottom of the page to specify whether the values entered for cash flow items such as goals, income, savings, or expenses will inflate between now and the start date of the item. This will not impact pension income, annuity income, loan income, business income, real estate income, or asset/property purchase goals.
For more details on the default inflation rates and the specific impact of each inflation type, please see our dedicated article on Inflation Assumptions.
Misc Tab
There are three Miscellaneous Assumptions that are able to be adjusted at a global level. These include the costs of purchasing and selling real estate, as well as the expense adjustment upon the death of a client:
Assumption | Description |
|---|---|
Cost of purchasing a real estate property | Represents costs associated with purchasing a property. This assumption will impact property purchases and primary home relocations. |
Cost of selling a real estate property | Represents typical real estate agent fees associated with selling a property. This assumption will impact property sales and primary home relocations. |
Expense adjustment upon the death of a co-client | Represents the reduction in living expenses associated with the death of a client or co-client. This expense adjustment will impact pre-retirement and retirement living expenses for the surviving client, and will only occur within joint plans. |
The Return Model Assumptions at the bottom of the page allow you to adjust the Monte Carlo calculations in RightCapital. The Model Type and Calculation Type assumptions provide an additional layer of flexibility for advisors who want to tailor the way the Monte Carlo projections simulate market volatility and calculate future asset returns.
Adjusting the Return Model Assumptions is not necessary, and the default selections (Standard and Geometric) are generally considered the industry standard for Monte Carlo simulations. For those interested, more details can be found in our dedicated article on Misc Assumptions.
