I contribute to a roth 401k account, a roth 401k has the same tax
setup as a roth ira so my contributions are post tax, grow tax free and
are not taxable at withdrawal. But that is only partially true, turns
out that an employee contribution is withdrawn tax free but the
employer contribution (which is calculated pre-tax) is taxed at
withdrawal. Is it woth it to track the employee and employer
contributions separatley in order to see the tax implications when I
retire? And if it is important to do that how would I do it? I am just
converting to Quicken 2006 home and business from Money 2006 so I am
still learning the software. If it is not worth tracking these two
contributions independently then I am still not sure how to set it up,
I am assuming I would set up as an "Other After-Tax Deduction" but how
would you catagorize that?
Thanks for any help...
This is very interesting. I didn't consider the employer's contribution in
the Roth 401(K) as having different tax consequences as your contribution.
But look at:
http://www.financial-planning.com/pubs/fpi/20050214101.html . It says
"There is, however, a twist to the Roth 401(k)s. Employees will place an
after-tax amount in contributions to the Roth 401(k). But the employer match
for the contribution--up to 3% of income at most companies--will go into a
separate regular 401(k) account. This would enable the company to deduct its
cumulative match contributions up front from its corporate income taxes."
This seems to me to indicate that no only will you want to track them
separately, but indeed you may very well HAVE TO since they'll be in
So how would you recommend setting that up in quicken, that is how
would you set it up so that the employers contribution is tracked in an
account separate from the employee contribution and how would you
catagorize each contribution? I just started using quicken this weekend
so I apologize if it is obvious how to do this.
How does the FI report the holdings to you? - do they separate the
holdings/earnings or do they just combine them?
Do you download account activity? - or enter it manually from
Answers to these questions will help in devising a tracking strategy -
it's going to be a work-around since QW does not [yet?] offer this type
of 401k account.
My initial inclination would be to set up two separate accounts - both
tax-deferred brokerage accounts. Would not use the '401k' account type
in order to retain full flexibility - you can always convert sometime
down the road if appropriate or desireable - buts it is a one way step
- you can not reverse it.
As an aside, FWIW, my 401k was established as a tax-deferred brokerage
account long before QW offered the specific 401k account type - have
not changed it and have no problems tracking or with tax implications.
Seems this is an example of where sub-accounts would be a very useful
I cannot seem to find a statement at the moment, I logged onto the site
and it appears that the contribution deposits are recorded separately
and I see that the investment purchases are made separately (see below
for an example).
10/03/2006 Cash Safe Harbor Match Contributions Cash Receipts
10/03/2006 Cash Employee Roth 401k Contributions Cash Receipts
10/03/2006 Stock A Safe Harbor Match Contributions Purchase
10/03/2006 Stock A Employee Roth 401k Contributions Purchase
Download is not available so I will have to manually enter the data and
I really want to set this up in the simpliest manner possible. My
thoughts are that I will set this up so that contributions are entered
when I enter my paycheck transactions and any other deposits are
receipts I will enter just once per quarter.
Any suggestions on how to do this so that I can minimize manual work?
Given that QW does not have provision for the Roth 401k - and looking
ahead to the day you retire and start making withrawals:
I would set up separate accounts; one for your contributions,
investments and growth and one for the employer match. These accounts
should be tax-deferred.
Your contributions can be easily handled in the paycheck as an
after-tax deduction - a transfer to the appropriate account.
For the match, I would set up a scheduled deposit [monthly?] to the
'Match' account - have it automatically entered in the register on or
about your regular payday. QW has a box for category for the deposit -
the QW category '_401EmployerContrib' is not available [??] in the
drop-down box but you can create a category for this. This category
will not have a tax-line assignment - it has no tax implication at
This should easily match the deposit activity reportd by your FI.
You can then enter the Buys, Sells and income events from info provided
by the FI.
My primary reasoning for the two-account approach is for handling
future with-drawals. The draws from your contribution account will be
fully tax-free. The draws from the match account will be fully taxable
as ordinary income. Draws from a single account would be taxable on a
pro-rata basis - some percentage taxable - perhaps the ratio of
employer/employee contributions if they are always consistent. QW has
no provision to split draws on a tax-free/taxable basis - they are
either one or the other and not a mix.
Down the road, if QW does make provision for the Roth 401k account, you
could then probably combine the accounts by transfering holdings.
For reporting purposes and comparing to the FI's statements, seems one
could create customized reports which included these two accounts -
holdings, transactions, etc.
My thoughts - comment??
Thanks for the detailed response. I am going to try your
recommendation this weekend and see how it works.
As a side note (not a quicken question) I wonder what is going to
happen when I quit this job and roll my roth 401k over to my brokerage
company. I would assume it would roll into a roth ira rather than a
traditional but where would the pretax dollars (the employer
contributions) go? I am sure they would not roll into the roth ira
unless I paid the tax during the roll over. I guess they would end up
in a traditional ira so that I would pay tax at withdrawal. I already
have both a roth and traditional ira so I think my existing accounts
could take the roll over without creating anything new. It will be
interesting when that day comes.
Just curious; why not setup the match in the paycheck as well?
(Assuming op does not have a regular 401k with a match).
[Ok, you probably would get an unwanted zero employee
contribution; is that why?]
First initial underscore Last name at mchsi dot com
To be truthful - did not really think it through - was focused on the
method I had used for employee contributions in pre-QW 401k account
days. In those days did not use a transfer to the 401k account for
employer contribution as I had the tax attribute for 'Transfers In' set
to handle the pre-tax situation for my contributions.
As you point out, setting up the employer contribution in the paycheck
would work but result in register entries for zero employee
contributions. Nothing wrong with this other than 'clutter' in the
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