Budgeting for retirement

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pbuchta

05 Jul, 2019 01:24 PM

Greetings!

So now that I am retired I need to set up the budget section to show that I will be receiving funds from my investment accounts as some type of income. Unfortunately when the funds are transferred from my investments into my checking account it does not show up as income on my budget. Instead what I have to do is list it as a negative number against my investment account and then it shows up as a reduction against my expenses. Does anyone know how to correct this? Thanks. Pete

  1. 1 Posted by sprimost on 05 Jul, 2019 02:26 PM

    sprimost's Avatar

    *From*: sprimost

    I am not support staff, just a user.

    I am US based so this type of income is a result of being required to
    take a required minimum of distribution from an IRA or from a 401k
    account upon retiring.

    This subject has been discussed a number of times with a number of
    work-around solutions, only because MD double entry system is not
    friendly to this type of transaction (appears as a sale of stock with a
    transfer to another account. but you cannot deduct taxes from the
    transaction!)

    One of the best suggestion that I saw (IMHO) is to record the sale from
    the investment account as a sale (that decreases the investment (# of
    shares) in the account). I then record that amount as a misc expense..
    so that I can reduce the amount in the account, and tag it for later
    reporting. I then add an income entry in the checking account, to deduct
    the taxes for the net income in the following manner:
        Deposit into the category for Income (I call it RMD Distribution)
        Payments (2) into the category for Withholding (I have the
    institution take out taxes so I need not do estimated payments.

    I then have a budget for the income category (RMD distribution) and, for
    certain reports I can query for the tagged amount(s)

    I hope this helps.

    /scp

  2. 2 Posted by pbuchta on 05 Jul, 2019 02:42 PM

    pbuchta's Avatar

    Thank you. I just wanted to make sure that Moneydance did not have a specific way to do this. Also, I notice that depreciation taken on assets comes off as negative income on their budget system if you don’t use the mixed intervals option. Right now also income from my dividends on my 401k comes up as a blank category in the expense column with negative numbers. Very, very strange.

    Best,

    Pete

    Pete Buchta, CTS-D, CTS-I
    35 Oswald Pl
    SI, NY 10309
    t: (718)948-6959
    c: (718)974-6601
    e: [email blocked]

  3. 3 Posted by sprimost on 05 Jul, 2019 04:54 PM

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    *From*: sprimost

    I am not support staff, just a user.

    I am not sure ow to think about the handling of depreciation using MD,
    but, technically, it is an expense. You would need a transaction that
    has a "payment" from the asset account.

    I used the "DivReinvest" transaction to record dividends in the IRA. If
    you have the fund send to the dividends to a money market fund within
    the IRA account, that would be a div and the a buy (in my small world, I
    try to keep things very simple. The key to get it on the reports
    correctly is to set the security from that you are getting the dividend,
    and the category specific for dividends from the IRA (I use Dividend
    (IRA) because it sorts well with the other Dividend type categories in
    the income reports. I've sometimes used the memo field for use in
    spreadsheets. A couple of years, I used to distinguish dividends from LT
    Cap gain vs. ST Capital gain, until I realized it does make a difference
    and would just be useless information (to me)

    Hope this helps

    /scp

  4. 4 Posted by pbuchta on 05 Jul, 2019 09:33 PM

    pbuchta's Avatar

    Yeah. I can see where things get messy. MD has a way to deposit money into an investment account, but no way to accurately show the distribution transaction from the investment account into the checking account and report it as income.

    Pete Buchta, CTS-D, CTS-I
    35 Oswald Pl
    SI, NY 10309
    t: (718)948-6959
    c: (718)974-6601
    e: [email blocked]

  5. 5 Posted by dwg on 05 Jul, 2019 10:35 PM

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    I'm a fellow user.

    Many Moneydance users are looking for what can be described as cash flow budgeting. What Moneydance provides is akin to category budgeting so things like transfers between accounts are not included, as you can assign both a category and a transfer account as that would be double counting. It is just a different form of budgeting, depending on your situation it may or may not suit.

    The key is to redefine the transaction so that it meets your needs while still reflecting what happens. What you are doing is drawing down your retirement account to give you an "income" except of course it is your own money to begin with so it is a transfer between accounts.

    The way I have approached this when I have been drawing down an investment that I have had to pay tax on is to create a category specificially for drawdowns that I transfer the Money from the investment account to (I do no use this category for reporting or anything else). I then create a new deposit transaction in my bank account categorizing somewhat in the same way as a paycheck with an amount records as Retirement Income an amount for tax etc. This meets the needs I have and should I believe also fit in with the way the budgeting system works. The technique is using Moneydance's underlying use of double account principles to record the transactions needed to draw funds from the retirement account, get the funds into the bank account but in a way that they can be reported on to suit our needs. Simply put instead of having a single transfer transaction what has been done is to break it into two transactions.

    On a side note when you define an investment transaction as a dividend it is correctly defined as an Income item because you categorize it as such, it is a transaction from an outside source, a DivXfr also correctly defined the item as an income item and then transfers it to another account, but it can do this because it is really two transactions in one, a Dividend and a Transfer. That is the key to what I have done above but there is not a way of packaging it up in a single transaction line like with DivXfr.

  6. 6 Posted by pbuchta on 06 Jul, 2019 02:01 PM

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    Hi dwg,

    Thanks for the information, and a workaround solution. I had thought about using that solution, but if MD makes changes to the program, there may be extra hours of work to undo. They have an investment section for regular taxable investment accounts, but no 401 or 403k sections. I tend to look at 401k the way the government looks at it, as deferred income to be taken at a later date. My thought is that there is no realized income until after securities are traded and funds are transferred out of the 401k. And that’s the dilemma. Also, if your employer matches or makes contributions on their own, it is not considered current income, since it is deferred and realized at a later date.

    MD needs to have a 401k section profile that would pull everything in. This would also make taxes on these accounts easier to plan for and manage during the course of the year. Thanks.

    Best,

    Pete

    Pete Buchta, CTS-D, CTS-I
    35 Oswald Pl
    SI, NY 10309
    t: (718)948-6959
    c: (718)974-6601
    e: [email blocked]

  7. 7 Posted by dwg on 06 Jul, 2019 10:09 PM

    dwg's Avatar

    I'm a fellow user.

    I cannot see TIK making changes to the software that would stop the solution working since the methodology is just using the principles of double entry accounting on which Moneydance has based its transaction handling.

    Moneydance is country agnostic - it is available and usable in any country which appropriate set up, I really cannot see the developers adding any country specific capability to the program.

    Hence I see in some instances the necessity to use accounting techniques to deliver a result, and I expect Moneydance to continue to offer a hybrid model of personal financial software methodology plus some accounting type capability.

    I have a retirement account that was taxed internally while I was working and hence I did not see that but when I initially started drawing on it after retirement it was partially taxable and I used this technique to handle that. That account is now not taxable at all. So another country a completely different system. I have no expectation of a system geared towards this but what I want is software that I can handle it in.

  8. System closed this discussion on 05 Oct, 2019 10:10 PM.

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