Cash Flow Simulation Settings and the New Year

Whether you’re simulating a scenario in which cash flow begins this month, this year, or later, your settings can impact the results of your clients’ plans. Learn which eMoney cash flow simulation settings can impact your clients’ plans as they transition from one year to the next.

Where do I access a client’s Cash Flow settings?

• Go to a client’s Advanced Facts
• Click on Assumptions > Miscellaneous
• Select Simulation

The Simulation settings within Miscellaneous Assumptions, allow you to change the underlying assumptions of your client’s cash flow simulation. With just a few changes to the settings, you can adjust when the cash flow starts based on the time of year or on their financial plan.

Let’s look at where you can find the Simulation settings, how to update them, and when you might use each setting option.

Cash Flow in Simulation Starts

The first option Cash Flow in Simulation Starts provides you with three options:

• January 1 of This Year – Cash flow will begin on January 1 of the current year, and you’ll see an entire year’s worth of activity. It’s important to note that if you’re planning for impactful events (significant expenses, transfers, deposits) within the current year and using this setting, you should update your base case once they’ve occurred in the real world. For example if you have a $50,000 bonus in the Fact Finder and that bonus arrives in March, best practice is to then remove the bonus from the Fact Finder once received so that the cash flows run after March does not keep including that money as an inflow.
• January 1 of Next Year – Cash flow will begin on January 1 of the next year and exclude the cash flow remaining for the current year. Often used toward the end of the year, this setting allows you to focus on the future while taking into account events that have occurred in the current year.
• This Month – Cash flow will begin in the current month and will prorate flows such as income, expenses, and contributions for the remaining months of the calendar year. You may select this option mid-way or later in the year to see prorated values on the cash flow report. To view a complete list of prorated items, click here.

Select the cash flow setting that works best for your needs and then click Save.

Additional Simulation Settings

Next, the Core Cash Account Growth Rate allows you to define a growth rate for assets held in the Core Cash Account. When excess cash flow exists, that excess can accumulate in the core cash account, however, it is best practice to transfer that excess cashflow to some other account as the clients would surely do in the real world. This can be done in the Savings and Transfers area of the Fact Finder. The core cash account is meant to operate as the client’s “wallet” and not meant to be an account that builds wealth. Therefore leaving the core cash growth rate blank (0%) is also suggested.

The Desired Remainder Amount corresponds to the Assets Remaining field in the Report Center. Changes made to the Assets Remaining field in a specific report will be applied here and across other reports with this field. This amount also affects the Monte Carlo score. A successful Monte Carlo trial has to have positive portfolio assets all years and meet the desired remainder amount upon the end of the simulation.

Finally, the Foreign Estate Tax Rate is the estate tax rate used for non-resident aliens (selected under Client & Co-Client in the Fact Finder). This rate is not used for U.S. citizens or resident aliens.

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