ANNUITY ACCOUNT

In Quicken or Quickbooks I would like to enter a Retirement Annuity. I have one and out of it will come two deductions. One for medical insurance and the other for federal income tax deduction each month.
An annuity is an "Income" which does not end until death. However that is a "Category" not an account. I need to know how to properly set up an account for an annuity. Only from an account can you split and designate different catagories. I am presently using Quicken however have purchased Quickbooks. I do not know if Quickbooks is any different regarding setting up an account. Have not loaded it into my computer as yet.
However in Quicken when setting up an account here are the choices: If I choose a bank or investment firm from the drop-down list I then get a pop-up that will ask me for more choices. The two major headings under ACCOUNT are Cash Flow & Investment which would come the closest of choices. Under Cash Flow the list to check are Checking, Savings, Credit Card, Cash Under Investment the list to check are Brokerage, IRA/Keogh, 401, Single Mutual Fund
It does not appear that any of these choices really fit very well and am still kind of in a quandary regarding how to set up and account for an annuity. If you can help me with this I would really appreciate it. Not real important but something I would like to enter to get a picture of my entire finances to properly set up a budget etc..
P.S. From a Catagory (Income) you cannot separate out deductions. That can only be done from an ACCOUNT! Any help will be appreciated.
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What will be held within the account? Securities & Mutual funds? OR, from your perspective, just cash?
Also, Quickbooks doesn't support investment accounts.
db
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I just opened the Paycheck Wizard and it looks like it will allow you to record it from an Investment Account with the ultimate transfer to your Checking. I did not follow this all the way through to test.
Oilcan
-----Original Message----- From: danbrown [mailto: snipped-for-privacy@yahoo.com] Posted At: Thursday, February 05, 2009 3:53 PM Posted To: alt.comp.software.financial.quicken Conversation: ANNUITY ACCOUNT Subject: Re: ANNUITY ACCOUNT

What will be held within the account? Securities & Mutual funds? OR, from your perspective, just cash?
Also, Quickbooks doesn't support investment accounts.
db
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Annuities are valuable but it's difficult to put a value on it. If you live to be 100 it's very valuable, it you die tomorrow it's not worth a lot. (I'm assuming that this is a single-life annuity with no guarantee.) If it's a fixed annuity you could make a discounted cash- flow calculation based on some assumptions of relevant interest rate and your life expectancy. If it's a variable annuity you can make the same calculation with the added complexity of variable rates of market return and cash flow.
I'd like to understand what you're trying to accomplish here and more background as to how you came to be in this position.
Ignoring the issue of the "cost" of the annuity, from the simplest standpoint you're receiving a check every month, sort of like a paycheck, and you could simply account for it as such. That is you deposit the check in your bank account and do the accounting appropriately. So, if you receive a check for $1,000 from which $100 has been deducted for taxes and $100 for medical insurance you'd make the following entry:
Dr. Bank Account $1,000 (Increase bank account) Dr. Med. Ins. Exp $ 100 (Increase med ins category) Dr. Fed Tax Esp $ 100 (Increase fed tax category) Cr. Annuity Income $1,200 (Increase annuity income)
(Annuity Income is kind of a misnomer because technically youre getting some of your own money back a reduction of basis and youre receiving an interest element..)
If you just bought the annuity and want to account for the cash outflow, that's easy: create an Annuity Account and put the cash in there.
It's the subsequent accounting of cash flows out of the account that becomes a little more difficult. By "difficult" I mean difficult from the standpoint of calculation because each check you receive represents a return of "principal" (that's the amount the annuity asset decreases) and an interest income element (that falls out of the "discount" calculation I mentioned above) and the amount of principal and interest changes with each check. Then, you have to "gross up" the net check you receive to account for the Federal Tax and Medical Insurance deductions.
Either Quicken or Quickbooks is perfectly adequate to do the accounting which ever way you choose to do it and the insurance company issuing the checks will most likely do most of the accounting for you.
Tom Young
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Tom, I took no issue with anything you said ... until the last paragraph.
The OP suggested the possibility (by his reference to brokerage type accounts) that the annuity might hold securities ... thus my previous question. Quickbooks does NOT support investment accounts ... thus making it wholly in appropriate if the OP's annuity holds securities.
db
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