Having a dedicated amount of cash holdings in a RRIF portfolio can prevent clients from having to collapse investments, advisors say
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“We’re looking to not sell invested money when the markets happen to be down and we can do that through a cash wedge strategy,” he says. “We might have 12 to 36 months of cash, depending on the client, so we don’t have to collapse any investments.”Laurie Stephenson, owner and CFP at Starboard Wealth Planners in Halifax, also has cash as part of RRIFs’ portfolios to mitigate down markets.
“That’s especially useful for people who really don’t need the money from the RRIF to make their ends meet in retirement,” he says. “Just because you have to take the money out and you’re forced to sell low in bad markets doesn’t mean the money has to sit as cash or you have to spend it,” he says. It all depends on the client’s tax brackets now and in the future, and the rest of their tax and investment situation, he adds.
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