401(k) Transaction Download - Type?

MrsHungryAsian

I have my 401(k) set up in Quicken, when I download transactions they show up with a Type "Buy" which seems to decrease the Market Value of my account. If I change the Type to "Add Shares" it increases the Market Value of my account. What is the difference and which one should I be using?

jacobs

Typically, you would use a Buy transaction if you are adding/purchasing additional shares of a security. But a Buy transaction reduces cash to fund the purchase, so you need to have a source of cash in the account. You might have a cash balance in the account currently, in which case there's nothing further to do; the Buy transaction reduces cash and increases your security holding. For instance, if your purchase is being funded from a payroll deduction, then your paycheck deposit transaction should include a split line which transfers money to the 401k account; the Buy transaction then uses the cash for the purchase.

The Buy transaction should not be decreasing the Market Value of your account (as seen in your Portfolio view), because it is exchanging cash for a security holding; the market value of the account from such a transaction should be unchanged. But the cash balance of the account (as seen in your transaction register) should decrease. 

You would generally use Add Shares if the source of the security purchase is coming from somewhere you don't track in Quicken. Add Shares simply increases your holdings, without deducting the cost from anywhere. 

jacobs

@MrsHungryAsian  So for your pay deposit, are you just recording the net amount you receive? That's fine in terms of your checking account balance, but it means you don't get correct income in a report (unless you're just interested in your take-home pay).

That's why many people record their pay with a transaction with multiple splits for their gross pay and the various tax and other deductions, including any deduction for a retirement plan. I'll post an example of such a transaction below…

Mark1104

can you post a screen shot of what you are describing? a Buy transaction should be offset by the cash available and have no impact on the balance of the 401(k).

you state it 'seems' to decrease the value.  Does it or does it not decrease the value? 

jacobs

Typically, you would use a Buy transaction if you are adding/purchasing additional shares of a security. But a Buy transaction reduces cash to fund the purchase, so you need to have a source of cash in the account. You might have a cash balance in the account currently, in which case there's nothing further to do; the Buy transaction reduces cash and increases your security holding. For instance, if your purchase is being funded from a payroll deduction, then your paycheck deposit transaction should include a split line which transfers money to the 401k account; the Buy transaction then uses the cash for the purchase.

The Buy transaction should not be decreasing the Market Value of your account (as seen in your Portfolio view), because it is exchanging cash for a security holding; the market value of the account from such a transaction should be unchanged. But the cash balance of the account (as seen in your transaction register) should decrease. 

You would generally use Add Shares if the source of the security purchase is coming from somewhere you don't track in Quicken. Add Shares simply increases your holdings, without deducting the cost from anywhere. 

MrsHungryAsian

@jacobs thank you! I do not have my paycheck set up in Quicken so that explains why I have to update the "Buy" to "Add Shares" when I download them. I may research how to set up my paycheck, might be easier than changing each transaction one by one. Thanks again! :)

jacobs

@MrsHungryAsian  So for your pay deposit, are you just recording the net amount you receive? That's fine in terms of your checking account balance, but it means you don't get correct income in a report (unless you're just interested in your take-home pay).

That's why many people record their pay with a transaction with multiple splits for their gross pay and the various tax and other deductions, including any deduction for a retirement plan. I'll post an example of such a transaction below…