Creating an account for a pension

Leslie Jones

I am not taking my pension yet but I would like to create an account so it counts as an asset. I do not see Pension listed under Investments. Is Asset the right type of account?

YingDave

That is the way I have set up my retirement pension in the accumulation stage. I am not interested in tracking every single transaction - so I group them together and make a manual once or twice a year entry so that the asset value reflects as of the date on the statement. Actually I have one asset account that has many different pension funds. In this case I keep the "Payee name - Account #" always the same so when I run a register report I subtotal on Payee. I also exclude this account on the account summary net worth totals but that is a personal choice.

Of course there are several ways to do it. You could use an investment register and create a security with the name of the fund to track it manually (when you set up a security it does not have to be an exchanged list item). Hope this helps.

GeoffG

A pension is basically an annuity and may constitute a significant portion of one's retirement income. The way I handled my wife's pension was to add it as an investment. In her case, since she was still working at the time, I set it up as 401(k) type account (not connected to any institution). The reason for this was the payroll deductions were added to her account, thus increasing the value of the pension year over year.
Her employer provided a yearly statement showing the payroll deductions to reconcile to and more importantly, listed a (forget the exact term) comparable asset value that I could use to manually update the pensions "perceived" total value which grows every year until retirement. Now that she is retired, the total value remains unchanged and is part of our total investment value.
However simple or complex you want to track is up to you, but important to include.

volvogirl

GeoffG.....why did you leave it?  I had a small annuity from a job from the early 80s.  Just posted interest to it once a year from the statement.  Then when I turned 65 it turned into a monthly income.  So I'm getting around to cleaning up it up Quicken.  I decided to just zero it out by entering a payment for the balance back to the same account to zero it.  It was very small only 24,000.  

But I don't know what to do with my husbands retirement contributions.  Over 40 years it built up a LOT and I have a big balance in Quicken.  He retired in 2009 so it's been overstating my net worth.  Although I figure it washes out with the increase in my house value which I don't track in Quicken.  House is probably up the same amount as his retirement account value. 

GeoffG

volvogirl, did not mean to imply the pension was left. In fact, it is providing income currently. Only that the amount is static as is the case with your husbands.
 
"But I don't know what to do with my husbands retirement contributions.  Over 40 years it built up a LOT and I have a big balance in Quicken.  He retired in 2009 so it's been overstating my net worth.  Although I figure it washes out with the increase in my house value which I don't track in Quicken.  House is probably up the same amount as his retirement account value. "

Have not considered this until now, but I suppose you could reduce the total value of the pension investment each year by the pension payout amount received each year. It of course is only an approximation, but would help more accurately reflect the total value. Of course mortality and survivor benefits would make this completely mute.

volvogirl

Oh I know you weren't implying that.  The TSA Annuity turned into an income stream so the balance is no longer available or static. Hope I live the 12 years to recoup my account value $24,000/$173 per month.  Well actually I only put in $2,600 and it grew to 24,000!  Guess I already got my 2,600 back.  

Same with husband's pension.  It's not an account or amount he can get, right?    Even if I went back and reduced the value each year for the retirement checks (if I could figure out his portion),  it would still be a big hit to my current net worth.  

John_M

@volvogirl Here's another way to look at this. Unless your TSA is available at this point as a lump sum, it has no market value and should be zeroed out. It may seem like you are taking a hit to your net worth, but what you've actually done is trade a pot of money for future income (which has an actuarial present value, but in reality is unknown).

Here are some examples of why I wouldn't treat this as an asset:

1. If you were going to go to a bank for a loan, they would include your annuity as income, but they would not include the old TSA as an asset, since it would be double-counting.
2. Assuming you are a US citizen, you have been contributing to Social Security. Have you counted your contributions (and for that matter, your employer's) as an asset? Probably not, since you do not have access to this money as a lump sum. Again, its only value is as future income.

Alternative viewpoints are welcome!

By the way, I had the same situation and chose to take the hit to net worth. In the end, it's just a number for me. No one else cares. If you want, you can create two net worth reports – one with and one without the TSA. That way, you can create comparison reports without mixing apples and oranges.

Leslie Jones

John M that makes a lot of sense. Just not count it until I start taking proceeds from it because as a pension the total sum does not go away like a savings account or cash from a brokerage account.

John_M

Or you could track it now and then zero it out when you start receiving payments. There may be reasons to do that, especially if you are contributing to it. That way you could track your contributions. However, if it's not contributory, it's probably not worth trying to make up a number.

As you can see above, there's lots of ways of approaching this – none of them "right" and none of them "wrong."

Leslie Jones

Thanks John. It is a union pension that my employer contributes to, not me. I think not showing it or having 2 net worth accountings is a good idea. One pension is a lump sum that I will get in full when I retire. I will keep that as an asset. The other I will remove. Thanks all.

NotACPA

When, in the mid-1980s my employer changed from a Pension Plan to a 401k, the Pension plan was SO overfunded that the bank bought all of us annuities to use up the excess cash (legally, they could have pocketed it).

I set up that annuity account in Q as an ASSET type account.  MetLife held the annuity, and they provided me with an "amount the value changed" statement every year ... which I posted as a Balance Adjustment in that asset account.

Now that I'm drawing down the annuity, I record a monthly transfer from the Annuity to my checking account.

When the value in the annuity account is depleted (in about 5 years, if I live that long), I'll switch to using an Income category for the monthly payment.

volvogirl

But then it doesn't show up as retirement income like for your tax return, does it?

John_M

I have my pension income coded to 1099-R in the category section, so that it shows up in the Tax Schedule report.

NotACPA

volvogirl said:

But then it doesn't show up as retirement income like for your tax return, does it?

Sure it does ... because the tax schedule for transfers out of the account is set to "1099-R- Total Pension taxable distribution"

volvogirl

I'll have to check that out!  Hmmm, thinking out loud, so if I go back and make the deposits transfers from the Annuity or PERS accounts it will be a wash and my net worth won't change, right? That sounds good.  So my net worth might not really be overstated.

jnprop

I appreciate all the commentary above. I have read it all. I am in the same situation and not sure what I want to do. It's my husbands pension thru Teacher's Retirement. He is only contributing right now... it does have a value. I currently have it set up as an asset for the check deduction to be recorded to an account and I like to see the number of the total (which is significant 100K+ currently) in my investing total though I realize we will never see that as a lump sum, but instead as monthly income at retirement. So as everyone else not sure what the correct answer is. Seems like Quicken could address this and have a place to put pensions. You can put Pensions in the lifetime planner I noticed. I am slowly getting that data input for that to be useful

jnprop

@John_M......Not sure why your comment is not here. I got the email alert that someone responded. Thank you for your comments. I do appreciate them and yes you have given me lots to think about! (I was able to read your comments in the email)

John_M

I spent about a half hour creating a long response and saved it. Then I went back in to edit it. After I hit save again, the whole thing disappeared with a message that said it would be posted after the moderator approved it.

Quicken_Tyka

Hello @John_M

I apologize that you have not received a response and that the comment you have put together has gone missing.

Typically, when this occurs the comment is forward to a moderator area for review. Unfortunately, I was unable to locate this comment to be able to restore it.

This was most likely done in error as you offer quality responses and do not see it being denied intentionally do the content.

I have gone ahead and made adjustments to your profile to prevent your content from being marked as spam in the future. I would like to apologize again for the missing content as it can be time-consuming to create and frustrating to have it disappear.

-Quicken Tyka

John_M

Thanks Tyka.