IRA Income Budgeting W/Transfers

Chris Mead
Chris Mead Member ✭✭✭
I have a question and I'm sure someone has seen and solved this before.

I am creating the 2022 budget and as always the issue is the difference between income and expenses (for all of us.)  In order to remain true to the checking account (inflows and outflows), I've created a transaction that accounts for the IRA (I'm retired.)

The IRA transactions are split into two components, net income and tax (actually tax is Fed and State but that is inconsequential.)   The IRA income transaction is actually a transfer from a Quicken IRA account.  To support the IRA transaction into cash income, Quicken first sells shares to reach a dollar amount.  Then dollar amounts are transferred:  One amount into checking (the income portion) and another split amount into the tax (expenditure) category.

So for instance, for each month, I need $75 but $100 must be sold.
Two sales transactions are created: One for $75 and one for $25.  

Those transactions add $100 cash to the IRA account are executed by the IRA holding institution.  Then, the IRA holding institution transfers $75 to my checking account as income and transfers $25 to the government as tax.  That is represented in Quicken as a Payment/Deposit of $100, reducing the IRA cash back to zero (T-Account balance), which is then split as a TRANSFER of $75 to checking and $25 to taxes.  So far, so good.  Everything reconciles.



The problem is the budget. Quicken subtracts income from expenses.  One should attempt to reach a zero state, i.e., income less Expenses equals zero.  (As a note, an expense can be a transfer out to savings which most folks should be doing who are working.)

In my case, income, which is already net, is debited by expense which has the tax component.  Back to the example.  The budget shows an income transfer to checking of $75.  It reconciles to the actual transfer of $75.  The budget also shows a tax payment of $25 which also reconciles.  

Written out, seventy-five minus twenty-five is fifty.  It should be seventy-five. Restated, Quicken is budgeting Income Net minus Expense where it should budget Income Gross minus Expense.

When choosing the categories to budget, on the income side is only transfer which is net and not the gross.  I would like to budget the gross sale, i.e. the $100 but Quicken doesn't provide for that.

How do others who are using Quicken for retirement income budget that income?
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Best Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    I think what you want to do is enter transfer differently. Enter your sale transaction in the IRA account as you have been. But don't enter a transfer transaction there. In the checking account, enter a deposit of $75 with two split lines: a $100 transfer from the IRA account and a $25 tax payment. Now you have your transfer minus expense equalling $75.
    Quicken Mac Subscription • Quicken user since 1993
  • Chris Mead
    Chris Mead Member ✭✭✭
    Accepted Answer
    Hi Jacobs,
    I entered the transaction as you suggested.  It is actually the same transaction but rather than a "push" from the IRA account, it is a "pull" from the checking account.  As the full amount is transferring, I was then able to budget the full amount.

    This was a very simple fix.  Once the Quicken web page allows for it, I'll elect that you answered the question.

Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    I think what you want to do is enter transfer differently. Enter your sale transaction in the IRA account as you have been. But don't enter a transfer transaction there. In the checking account, enter a deposit of $75 with two split lines: a $100 transfer from the IRA account and a $25 tax payment. Now you have your transfer minus expense equalling $75.
    Quicken Mac Subscription • Quicken user since 1993
  • Chris Mead
    Chris Mead Member ✭✭✭
    Jacobs,

    Maybe I can test that.  That is, enter the sale transaction but then don't plan anything at all.  I wonder what Quicken would do?  If Quicken just would enter the $75 to me and ignore the expense side, then all that would clear is $75, right?
  • Chris Mead
    Chris Mead Member ✭✭✭
    Jacobs,

    Also, one other clue.  For my pension (Yes I'm lucky enough), I handle it the exact same way.  But it works as it is not a transfer.  In that case it doesn't go though another Quicken account, like the IRS holding situation which I manage.  It's something in the way transfers =have to be budgeted versus reconciled.
  • Chris Mead
    Chris Mead Member ✭✭✭
    Accepted Answer
    Hi Jacobs,
    I entered the transaction as you suggested.  It is actually the same transaction but rather than a "push" from the IRA account, it is a "pull" from the checking account.  As the full amount is transferring, I was then able to budget the full amount.

    This was a very simple fix.  Once the Quicken web page allows for it, I'll elect that you answered the question.
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