Tracking retirement account contributions in budget?

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JR

25 Jun, 2019 01:16 AM

I am having an odd issue with MoneyDance that might be my misunderstanding but I'd love some clarity.

I make regular contributions to an IRA wherein I hold a mutual fund. I would like to track these contributions in my MoneyDance Budget. I am using the 'mixed interval' budget format, since that's what I'm familiar with (though the intervals are all set to annual).

The budget tracks the contribution accurately UNTIL I use the transferred cash to purchase into the mutual fund. At that point it removes the amount of the purchase from the budget report. I don't know where it goes. The end result is that since 100% of the cash transferred is used to purchase funds in the account, the budget continually shows $0 for my IRA account contributions. If I instead keep the contributions in cash and do not enter the mutual fund purchases in MoneyDance, then the budget tracks my regular contributions accurately, but of course my account value no longer matches between Vanguard and MoneyDance.

It seems to me that for the purposes of budgeting, using cash in an investment account to purchase stocks/funds/etc held within that account should not counteract the cash contribution into that account. I think the investment account should be the "end point" for the transfer as far as budgeting is concerned. Purchasing a fund within an investment account with cash held in that account should not be considered the same as a transfer out of that account, since the purchased fund is still held in the same account (and presumably has the same value as the cash did at the time of purchase).

I tried changing the category in the budget to be not just the IRA account but the specific fund within that account, but this seems set up to track shares of that fund, not dollars, and my savings goals and tax filings all center around the yearly dollar value contributed.

I am using the most recent build 1880 on MacOS 10.14.2, though this issue has been around for some time.

Am I missing something or overthinking this? Thanks! - JR

  1. 1 Posted by JR on 05 Jul, 2019 04:45 PM

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    Any input or suggestion from Infinite Kind or other users on this topic?

  2. 2 Posted by avp2 on 09 Jul, 2019 05:15 PM

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    I use an Income "Tax Deferred (IRA, I also have a tax paid for RIRA and SS for social security, etc.) Savings" category to record/send contributions and distributions. The investment account transactions where I hold the IRA's then match statements and show correct value/s in MD. The category just does the double-entry balancing and things work pretty well.

  3. 3 Posted by JR on 09 Jul, 2019 08:00 PM

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    Thank you for the reply, avp2!

    Could you explain how using a category instead of an account for retirement transactions helps? Are you saying that you label your contributions (from your checking account, say) as going into an income category called "Tax Deferred Savings", and then label the transactions incoming to your retirement account as coming from that same category? Instead of transferring directly from one account to another, you create an income category to pass the transactions through? If so, wouldn't the net in this category be zero?

    As far as the budgeting goes, it actually works fine for me just moving money from one account to another UNTIL I purchase funds or stocks with the cash in the retirement account. This purchase seems to be treated as money leaving the account, cancelling my contributions in the yearly budget.

  4. 4 Posted by avp2 on 09 Jul, 2019 10:06 PM

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    Don’t know if it will work/help with your budgeting needs. That is why I posted “this is what I do”.

    I think MD’s budget functions do not work/show anything but cash amounts. It may be some long while before MD is able to show investment or asset valuation in budget functions.

    I use MD's budget bars to show how I am doing for IRA savings (minimum) distributions. A distribution category does work for that and, I have found by experience, provides more flexibility in balancing/handling investment account eccentricity (or differences from bank/cash accounts).

    What typically happens for a distribution from one of my investment accounts is, after a sell, the cash transfer is directed to the distribution category and the cash arrival in my bank checking is then directed to a savings category (less taxes if any which would go to my tax paid category). When I had contributions (retired now), I would direct those to my savings category/s from within the investment account. Typically, only net income from pay would be deposited in my receiving bank account so that there was no need to balance taxes or contributions for that bank account transaction - the net would go to a taxable income category. All was balanced regarding double entry and budget viewable via cash amounts.

    I realize this may be "clear as mud", until you try it for awhile, but hope it helps.

     
    Al Pawlowski
    Los Osos, CA USA

  5. 5 Posted by dwg on 09 Jul, 2019 10:49 PM

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    I'm a fellow user.

    In the early part of your original post there is something bothering me. You state "The budget tracks the contribution accurately UNTIL I use the transferred cash to purchase into the mutual fund." The implication is that transferred funds are showing in your budget. However Moneydance has implemented an Expence budget system and transfers are never considerd to be an expense so should not be seen in the budget.

    The budget should only show categorised expenses. To track a transfer in a budget i.e. you are looking to do cash flow budgeting, you need to record the transfer as two separate transactions, using once account and one category in both, one you can report on the other just to satisfy double entry rules.

    For example, one method could be to enter the transaction in the bank account to obtain the funds but use a category that you budget for the destination. This draws the funds and satisfies the budget side. In the investment account you could use a Misinc to record the money coming in but drawing on another category created for the funds. Then do your buy transaction as normal, you do not use this category for anything else. Don't use the same category for both transactions as they will cancel each other out.

  6. 6 Posted by JR on 09 Jul, 2019 11:28 PM

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    Thanks for weighing in, dwg!

    What you state is correct: transferred funds are showing in my budget. This confused me too, since in searching this forum I found several posts of people complaining they can't track mortgage payments in their budget. I'm not sure what they're doing differently, but this has always worked as expected for me. I am using the 'mixed interval' budget format, and it accurately tracks transfers between accounts. My mortgage is set up as a Loan account and my IRA is set up as an Investment account. Transfers from my checking account into either of these are tracked perfectly in the budget, and I've been doing it this way for years.

    Where it gets weird for me is that purchases of stock or mutual funds within an investment account are treated as transfers out of that account for the purposes of budgeting, so if I record the buys then my budget does not show the contributions. For now I just leave it in cash (in MoneyDance) until the end of the year, to confirm I am on track with my budget, then I download all the buys for the year and sync up with Vanguard.

    Check out the 'mixed interval' budget format and see if it behaves the same for you. It should track transfers just like tracking any other category.

  7. 7 Posted by dwg on 09 Jul, 2019 11:58 PM

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    I recall from some older posts that the mixed interval budget used to allow transfers to be in the budget but that this was changed sometime in the 2017 stream, there were complaints about this change in behavior. I wonder if what you are seeing is somehow tied back to an older version of Moneydance and how it worked and it is still partially working as it used to.

    The change you are seeing with purchasing securities doesn't really worry me in itself. I see this as replacing one asset with another i.e. Cash in a brokerage account -> owning units or shares in a fund/stock so it would not be in an expense budget. I suspect this behavior is being seen because of the earlier transfer appearing in the budget.

    Yes there is odd behavior occurring but I tend to think that it all relates back to the transfer appearing in the budget and it goes downhill from there. As to how and why I have no idea. Unless someone else can chime in I suspect that this will be one for Sean (the developer) to work out

  8. 8 Posted by JR on 26 Aug, 2019 04:06 PM

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    Hi Sean - I believe this is a bug in the budgeting ability of MD.

    Account to account transfers are tracked accurately in the budget, but I believe purchases of stocks/assets held within an account should not affect the budget, and they currently do.

    Feel free to contact me in a private discussion if you would like screen shots or more details.

    JR

  9. Support Staff 9 Posted by Sean Reilly on 27 Aug, 2019 09:05 AM

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    Hi JR,

    Ah yes, I missed the fact that stock purchases and sales would be reflected in a budget that referenced the investment account. I also agree that they shouldn't be included since they are just moving value between the investment account's cash value and the security.

    I also do plan to add the ability to budget for transfers to or from other account types (not just categories) in the new style budget.

    Thanks,
    Sean

    --
    Sean Reilly
    Developer, The Infinite Kind
    https://infinitekind.com

  10. 10 Posted by JR on 27 Aug, 2019 03:46 PM

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    Thank you Sean! Very glad to hear we are thinking the same.

    Also glad to hear of your plans for the new style budget. I would only ask that you not remove the older mixed interval budget style, since that is the method I am used to and prefer.

  11. Support Staff 11 Posted by Sean Reilly on 27 Aug, 2019 09:20 PM

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    Hi JR,

    No worries - the mixed-interval budget style definitely won't be going away.

    Thanks,
    Sean

  12. System closed this discussion on 26 Nov, 2019 09:30 PM.

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