Changing the Default CFM Logic

When you enter a value for the client's After-Tax Spending (real dollars) and run the scenario, Snap will automatically contribute to or withdraw from the assets following a default order of contributions and withdrawals for various account types. We call this the default cash flow management (CFM) logic.

The default logic that Snap follows is based on reducing the client's taxes in each given year. This optimization works well for many cases, however, you can additionally modify the default algorithm and achieve an even more desirable order depending on what you wish to optimize for, given the client's goals, needs, and priorities.

1

Disable automatic cash flow management

You may wish to turn off automatic contributions and withdrawals (except for mandatory withdrawals from registered assets). By default, automatic cash flow management (CFM) is disabled until retirement, but you can disable it for all years using the blue icon at the top of the CFM Start age column. You can also select the year to start automatic CFM by selecting a year under the CFM Start Age column.

In the following example, we have selected age 65 as the CFM Start Age to highlight how cash flow management works. There are no contributions or withdrawals to any of the Capital Assets until the year John turns 65. If John wants to spend $54,000 after-tax each year, by enabling the CFM Start Age at 65, you can enter the $54,000 amount and Snap will start making automatic withdrawals as needed. Here, the Non-Registered account has an automatic withdrawal of $45,884 in 2026. Before that point, no automatic contributions or withdrawals are made. The default CFM Start Age is the first year of retirement (Age 65 for John).

For more detailed steps on automatic and manual cash flow management, please click here.

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2

Change the underlying default logic with the CFM Order column

The underlying default logic is to automatically contribute to RRSPs first, then TFSAs, then Non-Registered assets. Automatic withdrawals are made in reverse order. To change this default order, first, enable the Cash Flow Management (CFM) Strategies feature on the Planning Page in the Capital Assets header.

A new column will appear on the Planning Page called CFM Order. The default Contributions order is displayed in this column as R, T, N (Registered, TFSA, Non-Registered). The default Withdrawals order is displayed as the reverse, N, T, R (Non-Registered, TFSA, Registered).

You can make changes by clicking the text under the Contributions column or the Withdrawals column, selecting a new order, and copying down to a certain age.

Using the same example as above, we have moved the CFM Start Age to the first year of the projections, age 61 for John. Then we have chosen to contribute any surplus to the assets in the order of TFSA, Non-Registered, RRSP (T, N, R). Withdrawals at retirement come first from the RRSP, then Non-Registered, then TFSA. (R, N, T).

For more detailed steps on using the Cash Flow Management strategies feature, please click here.

Although you can change the CFM order year by year using this method, this is the broad stroke method. For more finesse, manual contribution and withdrawal overrides are also available as detailed below.

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3

Adjust the underlying default logic with the CFM Method

For plans with multiple accounts of the same Type (e.g., a client with two TFSAs) the default logic is to contribute to or withdraw from the accounts on a proportional basis. You can change this default by switching the CFM Method from Proportional (based on value) to Sequential (based on order).

With the default CFM Method of Proportional (based on value), if there is $10,000 to deposit to non-registered accounts and you have a non-reg with $50,000 and a non-reg with $150,000 as of that year in the plan (and neither account has been overridden), then $2,500 will be deposited to the first account and $7,500 will be deposited to the second account. This approach is ideal for quick illustrations as it will help maintain the desired asset allocation and return assumptions in the plan.

If the CFM Method has been switched to Sequential (based on order) then Snap Projections will deposit excess cash flow or withdraw needed funds from the first account listed on the Capital Assets table that has no override on the Contribution column. If there is $10,000 to deposit to non-registered accounts and you have a non-reg with $50,000 and a non-reg with $150,000 as of that year in the plan, then $10,000 will be deposited to the first account and nothing will be deposited to the second account. This approach is ideal when a client plans to use a particular account first (e.g., an account at a specific institution or holding a specific investment).

You can change the order of Capital Assets by moving an account up a row in the table on the Scenario Setup > Assets page and then clicking Save Order once you've reached your desired list. If you have Sequential (based on order) selected for your CFM Method, these changes will impact the results of your projection.

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4

Enter manual contribution or withdrawal overrides

You can override both the default CFM logic or the CFM order by entering custom amounts for contributions and withdrawals directly on the Planning Page.

An overridden contribution or withdrawal is evident by the yellow background of the cell and the small "x" in the cell. Here is an initial example where overrides have been entered to make RRSP and TFSA contributions until retirement and RRSP withdrawals have been specified in retirement.

In the years where John is still working, he plans to save $2,400 to his RRSP and $6,000 to his TFSA annually. These contributions have been entered manually, as indicated by the yellow highlighting under each account's Contribution column.

Age 65 is the CFM Start Age, and it is at this point where the cash flow management default logic starts. The default withdrawals come first from the Non-registered assets, then TFSA, then RRSP. A contribution override of -$12,000 per year has been entered for the RRSP account which forces a $12,000 withdrawal. The remaining after-tax cash is automatically withdrawn from the Non-registered account to reach the $54,000 spending target.

You can also use overrides to block automatic contributions and withdrawals from a specific account. For example, to stop Snap from withdrawing from the Non-registered account, we have entered a $0 override here. Snap bypasses that account and takes withdrawals from the next available asset type, the TFSA, and then the RRSP once the TFSA is depleted.

Overrides are useful when you want to make a different contribution and withdrawal decision for a specific account. If you want to change the overall order of contributions and withdrawals throughout the projections, changing the CFM order will be the easiest option.

To create an override, simply click on the value under the Contribution column for the asset and enter the contribution details in the pop-up window. Enter the Contribution amount (a negative value for a withdrawal), select Copy down until age, and click the blue checkmark. Then run the scenario to update the projections.

For more detailed steps on using manual overrides, please click here.