Financial planning software company RightCapital unveiled new dynamic retirement spending strategies on its platform this week. The new offering gives investors the ability to better plan their finances once their working days are done.
“The industry has been using a rather simple retirement expense approach in the financial planning process for many years,” RightCapital CEO Shuang Chen said. “The ability to offer multiple options for retirement spending within our comprehensive planning tool is a significant step forward.”
Traditionally, financial planners have relied on an inflation-adjusted retirement spending model which focuses on a single input – the rising cost of living – to anticipate an increase in retirement spending each year. One criticism of this approach is that it does not account for changes in an individual’s portfolio that might significantly affect how much they are able to spend in retirement. RightCapital’s new offering factors in changes in portfolio value, reducing retirement spending projections when the portfolio loses value and giving investors the option to spend more in retirement should their portfolio significantly increase in value. The two dynamic strategies – referred to as guardrail and floor and ceiling – enable retirement spending to adjust in sync with portfolio performance and investment strategy parameters rather than being limited to tracking the rate of inflation.
Dynamic strategies such as those now available on the RightCapital platform more accurately reflect how individuals respond to changes in their investments in the real world. As Michael Kitces, Chief Financial Planning Nerd for Kitces.com and Head of Planning Strategy for Buckingham Wealth Partners explained, “as advisors, we cannot eliminate the uncertainty of markets themselves, but tools like RightCapital’s dynamic spending can help eliminate the uncertainty for clients of what they’d have to do in response to those market events, facilitating better client conversations about how to keep their retirement on track.”
Other features of RightCapital’s dynamic retirement spending strategies include the ability to customize spending levels by age, anticipating a higher level of spending early in the investor’s retirement life and tapering off as the investor ages. The strategies can also incorporate changes in healthcare expenditures over the course of the investor’s retirement, as well.
Founded in 2015 and headquartered in Shelton, Connecticut, RightCapital demonstrated its technology most recently at FinovateSpring in 2019. At the conference, the RightCapital team demonstrated the company’s API/Enterprise solution, which gives financial advisors the ability to offer their clients access to custom applications ranging from PFM to account aggregation to secure document sharing. In June, RightCapital announced that it would “enhance (its) integration” with partner Riskalyze, a specialist in risk alignment and portfolio analytics. Also that month, RightCapital and a coalition of fintechs including fellow Finovate alum Betterment launched the RIA Tech Suite to provide financial advisors with services and tools to automate back-office operations.