Income

The Income section of the Profile is where the household's primary income sources are entered. This includes client salaries and social security benefits, as well as other income streams such as self-employment income, pension income, and more.

By default, the Income section is also the 2nd step of the initial data entry process for newly created clients (this can be changed via the Onboarding tab):

Looking for our training video?

If you'd prefer a more guided, visual overview of the Income section, click the link below to watch our dedicated Income training video:

Income - Training Video

Default Income Cards

There will be a number of income cards pre-populated within this section when you create a new client plan. There will be a Salary card present for each client, as well as a Social Security card:

Salary Card

For clients with W2 income, you can utilize the pre-populated Salary cards for one or both clients. Click on this card to open a data entry drawer on the right side of your screen, allowing you to input the salary information:

The Income name will default to [Client's] Salary, but you can enter a custom name if you'd like. In joint plans, you will also want to choose either the client or the co-client as the Owner.

Enter the Annual amount of the client's salary. This should be the client's current gross salary, as taxes will be applied automatically within the plan projections.

Specify the duration of the salary using the Income starts and Income ends fields. By default, these will be set to 'Already started' and '[Client's] retirement' respectively.

Determine the Annual increase on the salary. This is typically utilized to reflect the average or expected cost of living adjustment each year.

What does "Exclude from SS Tax" do?

If a client is working a job that does not pay into Social Security, you can check the 'Exclude from SS tax' box to indicate that the salary is not subject to SS tax. Once selected, the salary income will only be subject to Medicare tax.

Please click on the dropdown arrows below for more information on...

Salary Income Taxation

Salary Income Cash Flows Location

Removing Salary Income Cards

The other pre-populated entry within the Income section is the Social Security card. This card can be used to reflect both current and future social security retirement benefits. Click on this card to open a data entry drawer on the right side of your screen:

If the client is already receiving Social Security retirement benefits, check the Already Receiving box in the upper right of the card. You can then enter the Monthly amount that they are receiving, as well as the initial Filing age.

If the client has not begun receiving benefits, leave the 'Already receiving' box unchecked. The Filing age and Filing month will determine when retirement benefits will begin within the projections. The Estimated benefit amount determines how future benefits will be calculated:

Use Simple Estimate - Benefits are estimated using the annual amount and projected annual increase entered into that client’s Salary or Self-employment income card.
Based on SS Statement Value - You will be asked to enter the monthly benefit amount and corresponding start age from the client's Social Security statement.
Based on Historical Covered Earning - You will be asked to enter the client's annual covered earnings history.
No Social Security - RightCapital will not calculate a retirement benefit for the client. We will also exclude any spousal or survivor benefits for that individual.

Learn more about entering Social Security benefits

For a more detailed walkthrough of the data entry process for Social Security, please feel free to reference the article below:

Social Security Retirement Income

Please click on the dropdown arrows below for more information on...

Social Security Taxation

Social Security Cash Flows Location

Removing Social Security Income

Add Income

To add additional sources of income to a client plan, click the blue 'Add Income' button in the upper right. This will allow you to choose from a long list of income options:

Below you will find a brief overview of each income card, followed by additional information on data entry, taxation, and cash flow location. Remember that if you ever have any questions while entering client data, you can always reach out to the RightCapital Support Team for assistance!

Not seeing these income options?

If you are using a 'Goal Based' planning method, only pension and annuity income will appear within the Add Income menu. To learn more about the planning method setting and its impact on your client plans, feel free to reference the article below:

Impact of Planning Method - Knowledge Base

Self-employment

For clients who are self-employed, you can choose to add a Self-employment card in place of (or in addition to) a Salary card. This card is commonly used to reflect 1099 income. To add this card, click Add Income > Self-Employment:

Self-Employment Data Entry Overview

Self-Employment Taxation Details

Self-Employment Cash Flows Location

Pension

Pension income cards are one of two ways to enter pensions into RightCapital. These cards can be used to model both current and future pension income streams. To add this card, click Add Income > Pension:

When to use Pension Income Cards

Pension income cards are typically used to reflect Defined Benefit Plans that result in fixed income streams, such as teacher's pensions and government pensions.

Pension plans that are more similar to Defined Contribution Plans (personal pensions, alternative retirement plans for teachers, etc.) can be added as Investments in the Profile > Net Worth area.

Pension Data Entry Overview

Pension Taxation Details

Pension Cash Flows Location

Annuity

Annuity income cards are one of two ways to enter annuities into RightCapital. These cards can be used to model both current and future annuity income streams. To add this card, click Add Income > Annuity:

When to use Annuity Income Cards

More often than not, annuities are entered as assets in the Profile > Net Worth section. Annuity income cards should only be used in cases where you want to model the annuity as a fixed income stream, without accounting for its current value (for example, an annuity that has previously been annuitized).

Annuity Data Entry Overview

Annuity Taxation Details

Annuity Income Cash Flows Location

Distribution

Income Distribution cards can be leveraged to withdraw money from a specific account bucket, and distribute it as income within a client plan. To add this card, click Add Income > Distribution:

Learn more about Income Distributions

While primarily used to distribute invested assets as income, Distribution cards can also be used to model things like Roth Conversions, IRA Rollovers, and Net Unrealized Appreciation. To learn more, you can read our dedicated article on Income Distributions via the link below:

Income Distributions

Distribution Data Entry Overview

Distribution Taxation Details

Distribution Cash Flows Location

Other

Bonus

Bonus income cards can be used to reflect expected annual bonuses, either as a dollar amount or as a percentage of the client's income.

For salaried individuals (Self-employed box unchecked), bonus income will be taxed as W2 income (Line 1 of the 1040). Please note, this means bonus income will also impact 401(k) contributions. If the client is working a job that does not pay into Social Security, you can check the 'Exclude from SS tax' box to indicate that the salary is not subject to SS tax.
For self-employed individuals (Self-employed box checked), bonus income will be taxed as Schedule C income (Line 3 of the Schedule 1, Line 8 of the 1040). If the 'Service Income' box is checked, this income will also be subject to the phase-out of the QBI deduction.

Bonuses can be tracked alongside a client's salary or self-employment income, within the Retirement > Cash Flows > Summary > Income Inflows column.

Child Support

Allows you to model child support payments that a client is receiving now or in the future. Child support income is tax-free in RightCapital. Payments can be tracked within the Retirement > Cash Flows > Summary page, by clicking into Income Inflows > Other Income.

Alimony

Allows you to model alimony payments that a client is receiving now or in the future.

For divorces prior to 1/1/2019, income is taxable (Line 2A of the Schedule 1, Line 8 of the 1040).
For divorces on or after 1/1/2019, income is tax-free.

Payments can be tracked within the Retirement > Cash Flows > Summary page, by clicking into Income Inflows > Other Income.

Royalty

Allows you to model royalties that a client is receiving now or in the future. Royalties are taxed as ordinary income (Line 5 of the Schedule 1, Line 8 of the 1040). Payments can be tracked within the Retirement > Cash Flows > Summary page, by clicking into Income Inflows > Other Income.

Inheritance

Reflects a one-time inheritance, tax-free. Inheritance income can be tracked within the Retirement > Cash Flows > Summary page, by clicking into the Other Inflows column.

When the Inherited asset is set to 'Cash and Investment', income will first be used to fund cash outflows in that year. The remainder will be saved and reinvested into the client's taxable investments.
When inheriting a 401k or IRA (traditional or Roth), the income will not be used to fund cash outflows and will instead reflect as Planned Savings into the appropriate account bucket.

Reverse Mortgage

Allows you to model tax-free income associated with a future Reverse Mortgage. This data card will allow you to indicate interest rates, fees, closing costs, and which property the reverse mortgage is tied to. The payments will be visible in the Income Inflows > Other Inflows column of the Cash Flows > Summary. A Mortgage balance will also accrue within the Cash Flows > Net Worth table.

New Loan

The New Loan income card can be used to model new loans being taken out in the future. This card will result in a one-time income inflow, followed by a long-term expense as the debt is repaid. You can specify the loan type and dollar amount, as well as the interest rate and loan term. You can also choose a loan to refinance, which will apply a one-time payment to the selected loan. Any excess income will be added to cashflows.

The loan income can be found in the Income Inflows > Other Inflows column of the Cash Flows > Summary.
The debt payments can be found in the Expenses section in the Cash Flows > Summary. Mortgage payments will appear within the Housing (or Rental & Vacation Home) column, while other debt payments will appear in the Debt column.
The loan balance can be found and tracked within the Cash Flows > Net Worth screen. Mortgage balances will appear within the Mortgage column, while other loan balances will appear in the Other Loans column.

Other Income

The 'Other income' option can be used as a catch-all to enter any additional income streams. These cards give you full control over the amount and duration of the income, as well as the tax treatment. All of these options will be reflected in Cash Flows > Summary > Income Inflows > Other Income column, except for 'Tax credit' which only impacts taxes. 'Minister's housing allowance' will only be subject to self-employment tax, Social Security tax & Medicare tax.