I’m a control freak. I focus all my energy on what I can control and don’t stress about the rest.
Many investors spend time trying to time the market, but that just doesn’t work. Here’s what I spend time on.
In many situations we can control when clients make their investment withdrawals.
You can probably withdraw the maximum from an RESP during a student’s first semester at university because chances are they only worked for 8 weeks during their summer between high school and college. Withdraw less during the year they’re on an 8-month paid co-op placement.
It might take 20 minutes to plan out the three-to-five year withdrawal schedule, but this can save the student thousands of dollars in taxes.
Read: Withdrawal strategies
We also manage RRSP withdrawals. Our financial planning software projects OAS clawback. If it appears a client will be subject to clawback, we often intentionally withdraw from their RRSPs prior to 65 to reduce future minimum RRIF withdrawals and save as much OAS as possible.
Some clients still receive a severance or gratuity when they retire. A few times when clients were planning to retire in November and December, we told them if they worked until January 1st they could defer their lump sum payment until the next tax year, when they were going to be in a much lower bracket.
They didn’t have a problem working a few more weeks.
Managing cash flow
It seems talking cash flow is taboo in our industry. Whether a client earns $150,000 or $550,000 we always complete a cash-flow analysis.
Most clients have said to us, “We can probably reduce our spending without feeling it much.” Freeing up cash to pay down debt or save for retirement is well within our control.
Keeping enough cash on hand
When 2008 hit, our retiree clients didn’t have to sell their investments at a loss to keep funding their lifestyles. Each retired client has approximately two-to-three years of income stashed in a high-interest cash investment.
When markets crashed in 2008 we made withdrawals from the cash holdings. By 2010 the markets had recovered and we’ve been replenishing the cash ever since.
Drafting a will and Powers of Attorney
Controlling who makes care and financial decision on behalf of your clients, and controlling how their estates are distributed, is easy with the proper legal documents.
It’s great if you beat the benchmark by 3%, but if your client becomes permanent disabled their savings can be wiped out in a few short years.
Properly insuring against death, illness, disability, medical expenses and loss of independence puts you in control by shifting massive financial risks onto the insurers’ books in exchange for monthly premiums.