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 would add an event to the timeline to coincide with when the maturity occurs. Then 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 Planned Withdrawals screen to schedule a withdrawal at the given event. This would empty the fund into the cash flow as surplus, where it can be used to fund expenses.
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. This is done in the Savings or Investment screen depending on whether it is a cash account or investment 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.
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).
Select Amount: All Available.
Leave the other settings as their defaults, then click OK.
All of the funds will be transferred from the source account to target at the selected transfer event, effectively liquidating the source account.
This transfer will not show on the cash flow chart, but can be viewed by clicking on the bar in the chart for the relevant year, clicking Detailed Info and clicking the cash flow tab.
Note: Transfers are not Subject to Liquidation Limits
Transfers between accounts are not subject to withdrawal limits. Even if you have set a withdrawal limit on an account (using settings on the Advanced Settings > Withdrawal Limits 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. This is done in the Planned Withdrawals screen.
Give the withdrawal a name in the Name field.
Select the investment in the list of Available Accounts, click the arrow button to move it to the list of Selected Accounts.
In Scheduled Withdrawal Type select All available.
In the Time panel, select the product maturity event that you added to the timeline a moment ago so a green dot appears.
Then click Add.
At this event, the entire balance of the account will be withdrawn, effectively liquidating it and making these funds available in cash surplus. This planned withdrawal will show on the cash flow chart.
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 button.
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.
How to prevent ad hoc withdrawals prior to maturity
If you want to ensure that no ad hoc withdrawals are made from this investment prior to the planned withdrawal or transfer, go to the Investment screen and select the investment from the Ledger. Then expand Advanced Settings > Withdrawals Limit and select Scheduled Only. Then click OK, then Update.