Making IRA and 401(k) Mutual Investment Recordkeeping in Quicken Fast and Easy
Making IRA and 401(k) Mutual Investment Recordkeeping in Quicken Fast and Easy
Trying to track your IRA or 401(k) investments in Quicken? Here’s a suggestion: Give up. Here’s my logic. It probably doesn’t make sense to track tax-deferred mutual fund investments in Quicken. There’s no harm in doing so, but you don’t get anything extra for your effort.
Why Quicken isn’t worth the work
If your mutual fund investing is through tax-deferred accounts such as employer-sponsored 401(k) accounts, Individual Retirement Accounts (IRAs), and self-employed pension plans like Simplified Employee Pensions (SEPs), Keogh plans, and SIMPLE-IRAs, your investment profits aren’t taxed. Dividends and interest aren’t taxed, capital gains aren’t taxed, and capital losses aren’t tax-deductible.
How to simplify your investment recording with a bit of Quicken’s help
Instead, money you withdraw from the account is taxed. Restated in terms of Quicken mechanics, when you deposit money that has been withdrawn from, say, your IRA account into a bank account, you just categorize the bank account deposit as income. (The income category could be named something like IRA Distribution.)
Because you don’t need to keep records for the purpose of tracking your mutual fund profits, there’s little reason to go to the extra work of keeping mutual fund investment records in Quicken. You can easily obtain information about these accounts in several ways:
1. If you want to know the current value of your mutual fund investment, you can just look at your last statement from the mutual fund investment management company or give that company a telephone call. The big mutual fund management companies have toll-free numbers that give fund price and account value information. You can also look up the fund on the Web.
2. If you want to see what taxable income you have because of the mutual fund, you can look at your bank accounts and summarize the deposits you’ve made into these accounts.
3. You can get the annual return on the investment by looking at the annual report the mutual fund management company sends you at the end of the year.
A word about Roth-style accounts
By the way, let me make a comment about Roth-IRAs and Roth-401(k)s. Roth IRA and 401(k) accounts, as you might know, work differently from regular IRAs and regular 401(k)s. With a Roth-style accounts, you don’t get a tax deduction for money you put away into the IRA and when you withdraw money during retirement from a Roth-IRA (assuming you meet certain requirements) you don’t count the money as income. Accordingly, Roth-IRAs produce neither tax deductions nor taxable income. While these characteristics mean that Roth-IRAs appear very different from a regular IRA, they mean the same thing for your investment record-keeping: You don’t need to set up separate investment accounts for Roth-IRA investments made using mutual funds. You can get all the information you want from the mutual fund manager.
And one other tip for simplifying your investment record-keeping in Quicken
There are other, similar situations in which it doesn’t make sense to track a mutual fund investment with Quicken because you don’t get any new information or added value from your record-keeping effort.
Suppose you have retirement money in a mutual fund, you don’t buy and sell shares, and you don’t reinvest your mutual fund profits (because you live on these profits). In this case, it doesn’t make sense to track your mutual fund investments in Quicken.
You can keep a record of the mutual fund profits by using appropriate income categories when you deposit the dividend, interest, or capital gains distributions check into your bank account. And you can get investment activity and current market value information by looking at a recent statement or by telephoning the mutual fund investment company.
That much said, if you feel compelled to set up an account for an IRA, Roth-IRA or 401(k) mutual account, you can do so. The extra work you go through to set up and then keep records of your retirement account will deliver some modest benefits. By doing so, for example, you can have all your investment information in Quicken, thereby making managing this money easier. You can also prepare more accurate estimates of your net.
About the author: CPA Stephen L. Nelson’s accounting and finance books have sold more than four million copies in English. His most recent books are the downloadable do-it-yourself incorporation guides at Incorporating a business,Incorporating a Business in California , Incorporating a Business in Ohio, and Incorporating a Business in Washington.