When entering interest in a tax deffred account like an IRA,should you entered it as _IntInc or _IntIncTaxFree? Also, when a fund in your IRA pays interest in the form of reinvesting the dividends, should you first make a entry (_IntInc or _IntIncTaxFree) and than buy the number of shares that were issued or should you enter it as reinvest income reinvested? What is the best way? This is for Quicken 2008 Premier
You can safely use the "_IntInc" category in a tax-deferred account. The tax-deferred status of the account, by default, excludes interest, dividends, cap gains/losses, etc. from the tax reports.
The "_IntIncTaxFree" category is intended for use with tax free holdings in a taxable account; e.g., income on munis, etc.
Hi, RC. (Love that name!)
You shouldn't enter it in YOUR books at all, because it isn't YOUR income.
I've never had an IRA, 401(k) or similar plan, and have never used Quicken to account for one, even for a client. But I was in practice when Congressman Keogh got Congress to pass the first of such retirement plans back in the 1960s. These plans were invented to allow self-employed individuals to get tax benefits similar to those enjoyed only by employees whose employers established retirement plans.
The essential theory in all these plans is that a TRUST is created. Money is contributed to the Trust and no longer belongs to the contributor. It is technically owned by the Trustee, who has a fiduciary duty to manage it, in accordance with the Trust agreement, for the benefit of the beneficiary - the future retiree. So, while the beneficiary has a strong interest in what happens to the funds in the Trust, that money does not belong to the beneficiary until it is paid out of the Trust to him, at retirement (or early termination of the Trust). The beneficiary's income statement should not reflect any transactions or growth in the Trust, except maybe by a footnote. And the beneficiary's balance sheet should not include the balance in the Trust - again, except in a footnote.
As I said, I've never used Quicken for such a plan, but I THINK it should be in a separate Quicken "file" - actually a set of related files - established for the Trust by the Trustee. All that should show up in YOUR Quicken file should be contributions from your checking account, or via payroll deductions, to the Trustee - and the eventual retirement checks coming from the Trust. The Trust's file should reflect receipt of the contributions, plus all income, expenses and other transactions by the Trustee, including eventual pension payouts.
I know that most IRA beneficiaries ignore the legal niceties of all this theory. As I said, I've never used Quicken to account for such a plan, so I don't know how Quicken deals with blurring the lines between the employee and the Trustee. I'll let others tell you how, in practical terms, to handle these retirement plans. I haven't even bothered to read Quicken's Help file about this; have you?
Remember that I've been retired for over a dozen years, so be sure to check all this with your own CPA, who should be familiar with the current rules - and might be familiar with Quicken, too.
RC
Really? So I'm curious now. What sort of retirement plan did you have? Just a pension? Independently wealthy? Currently eating dog food and loving it? :-)
I'd say most people use Quicken merely to get control over their spending. IOW they get it to manage their checking account. Some enter accounts for their savings and their credit cards. Damn credit cards and debts - what a bother. But still I want to account for them and pay them, hopefully off. Some then get into online banking to make paying off such debts and other expenses in an easier fashion. Some look at /the bottom line/ and realize it's largely negative. I mean I have my checking account then mostly liabilities like credit card accounts, perhaps a car loan and mortgage. So some then think "Well gee I do have a car worth some money and a house worth some money" and enter in asset accounts for those. Then they start thinking about their retirement and how those are assets too. Plus they want to make sure that their investment choices don't suck. So entering in 401(k) and other retirement accounts and/or other non retirement accounts become something they want to have in Quicken so as to have /The Big Picture/.
As such tracking retirement accounts makes sense in the same Quicken file so one can take advantage of Quicken's tools to get an accurate financial picture of ones finances. Additionally such information helps with Quicken's financial planning tools.
Technically, legally perhaps the money isn't the individuals until withdrawn, however people rightfully see it as theirs as they are one of the few people who are allowed to gain access to it either at retirement or by paying early withdrawal penalties.
Most people see it as it's money that belongs to them.
Typical practice is to record an IRA, 401(k) or similar plan as an account in one's personal Quicken file. When you create an account, you designate it to Quicken as an IRA, 401(k), etc. so that it participates appropriately in reports, especially tax-related reports.
Guy
Hi, Andrew.
No pension except Social Security. Not independently wealthy. Just a good education, hard work and long hours for 30 tax seasons, spending less than we made - and good luck, I guess. As I think I've said before, it's partly a matter of my personal philosophy and partly a matter of timing. The current Keogh/IRA/401(k) climate did not occur all at once. It arrived in incremental stages during my working years in the 1960s to 1980s, with each stage a couple of years too late to do me any good. By the time I might have qualified, I had stopped paying interest and started earning some. THAT's the hump that most folks never get over. From there, it was just a matter of investing and reinvesting our savings until it snowballed into a nest egg. Haven't had to eat dog food yet. ; Damn credit cards and
Credit cards are a wonderful tool, when properly used. We've used them for decades and never pay any interest or annual fee. We use THEIR money - and earn interest on it - instead of letting them use ours. We never even look at the interest rates on our cards because we're not going to pay it, anyhow.
RC
And probably a much more meager retirement unfortunately. :-(
And if not that then independently wealthy - by definition.
Ah.... That would be the paying them off portion that I mentioned...
Hi, Andrew.
My definition of "rich" is "having a choice". Sometimes I eat steak; sometimes hamburger. I decide when to eat what. I don't HAVE to eat hamburger. ;>> pay
Ah... But you said "hopefully". It takes more than hope. And it probably will take more than a year or two. But once it's done the first time, it's easy after that. As I said, "THAT's the hump that most folks never get over."
Putting aside inheritances, jackpots and larceny, I know just two ways to become wealthy enough to have choices: Earn more than you spend, or spend less than you earn.
Yes, I know it sounds corny and maybe even silly. Like "eat less and exercise more" to lose weight. But that IS the formula. And it works. ;>> have? Just a pension? Independently wealthy? Currently eating dog
No offense intended. My definition of independently wealthy is able to get by nicely (a la steak) without assistance.
Yes which is why I said hopefully, because most don't.
Most assuredly.
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