Q - How do I liquidate (encash) an investment at a specific event or in a given year of a plan?
A - How you encash an investment depends on the type of investment.
For bonds (life funds) simply set an end event (red dot) at the point of encashment on the Time panel.
Invested funds and savings will normally remain on deposit until needed to fulfill expenses. However, the maturity of structured products could be scheduled using transfers or planned withdrawals.
For savings and all other types of investments you could either:
- Use the Transfers / Additional Contributions panel to transfer all available funds at said event into another account, such as your client's default cash account.
- Use the Step Up / Step Down panel and step up withdrawals to Maximum at a given event. This would empty the fund into the cash flow as surplus, where it may or may not be saved.
First, add an event to the timeline to use when scheduling a liquidation.
If you already have an event on the timeline that is positioned on the appropriate year of the timeline then there may be no need to add another.
Otherwise, begin by using the New Event button, on the Time panel’s Event tab, to add an event to the timeline for use in scheduling the future transfer of these funds or liquidation of the account.
Alternatively, go to the Time screen and drag and drop the event onto the timeline.
Option 1: Schedule Maturity by Future Transfer
Use Transfers / Additional Contributions to move the funds from this investment into another or into a cash account.
First select the investment in the ledger on the right side of the screen.
Expand Advanced Settings and select Transfers / Additional Contributions.
In the Transfer at Event drop-down, select the product maturity event that you added to the timeline a moment ago.
Select From This Account.
Select Amount: All Available.
In the To Account drop-down, select the account or investment that you want these funds transferred into.
Note: If you want the funds to simply go into ready cash, making them a first stop for expense fulfillment after income is exhausted, select the owner’s default cash account (e.g. John’s Cash).
All of the funds will be transferred from the source account to target at the selected transfer event, effectively liquidating the source account.
Note: Transfers are not Subject to Liquidation Limits
Transfers between accounts are not subject to withdrawal limits. Even if set a withdrawal limit on an account (using settings on the Liquidation Limits / Draw Down Strategy panel), preventing the software from taking any ad hoc withdrawals to fulfil expenses, you could still schedule one-off or recurring transfers from the account to another using the settings on the Transfers / Additional Contributions panel. Transfers between accounts are not subject to withdrawal limits and will therefore be allowed to occur.
Option 2 – Schedule Maturity by Planned Lump Sum Withdrawal
You could also liquidate the account using a single planned lump sum withdrawal.
With the investment selected in the ledger, expand Advanced Settings and select Liquidation Limits and Planned Withdrawals.
Select Planned Withdrawal.
And in the Start Draw Downs drop down menu, select the product maturity event that you added to the timeline a moment ago. At this event, the entire balance of the account will be withdrawn, effectively liquidating it and making these funds available in cash surplus.
It is important to understand that this planned withdrawal will remove all of the funds from the account, moving them into surplus where they will be:
1. Used to meet taxes and other expenses, if needed, in the selected year;
2. Used to make any regularly scheduled or one-off contributions to other accounts;
3. If unused (unallocated), will be considered spent in the year, depending on how you have the software set to handle surplus income.
You can change this assumption, if necessary by going to Preferences > Plan Preferences > Calculation Settings. Tick the Transfer Excess Income / Credits to Savings and click the Apply buttons.
Unallocated funds from each planning year would then be swept into the owner’s cash account (e.g. Savings > David’s Cash) where it can either be used to meet expenses later in the plan, left to grow at the account’s set growth rate, or swept or transferred into other investments.