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How do I properly record purchases of an employer retirement plan?

SkyPigPilot

I am using Quicken Classic Deluxe.

How do I record purchase of an employer retirement plan that come out of my paycheck before I get my deposit? I do not want to break down my paycheck, but I do want to show how many shares are purchased towards the plan.

I want to record these transactions in an investment account in Quicken, but I do not want to show a corresponding transaction in a checking account. Specifically, what do I need to put in the "use cash for this transaction" window. The default setting for this box is "from this account's cash balance."

Is that the correct selection? That makes the cash balance go negative with each transaction. I have been using the "shares added" action, but that seems to inflate the cost basis and gain/loss. I have many years recorded this way. If I need to change them, how would I go back and redo the transactions?

Thank you!

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Accepted answers

q_lurker

@SkyPigPilot

This is a federal employee Thrift Savings Plan account. The gain/loss percentage is 96%!

Given an 18+ year investment history, having an overall 96% gain does not seem unreasonable, if anything may be low. My IRAs (likely more aggressively invested) since 1/1/2007 show gains of well over 200%. Your ongoing contributions would also tend to bring down the aggregate gain.

All of the "purchase" transactions are done as "shares added." … Would that affect the performance numbers?

What I tried to say before is that the Shares Added should have worked fine. Since you are (apparently) only recording your paycheck on a 'net' basis (not breaking out the various deductions from the gross pay), you do not have cash going into the TSP account so you do not have cash in there to Buy Shares, so the Add Shares should be fine. As long as you get the 'Cost' of the Added Shares correct on a (close to) correct transaction date your performance numbers should be accurate. But you do need to get a clear understanding of the various performance numbers Quicken offer - some are better than others. I tend to find Average Annual Return to be most meaningful, especially for longer time periods.

q_lurker

@CaliQkn The OP indicated in the opening post "I do not want to break down my paycheck, ". With that statement, it doesn't matter if in the real world, cash from the paycheck goes to the TSP account. Yes, in the real world, that is what happens. Yes, I regularly recommend user model the real world with their Quicken data. That doesn't work for this user. No problem for me that way. The OP can still represent the TSP acquisition transactions with Shares Added, as far as I can see and get full and accurate investment performance measures.

q_lurker

@CaliQkn Yes, one can make such a deposit, and I indicated so in my first reply in this thread. Doing so would allow the OP to track their deposits into the account. I do not see that as a required method.

@SkyPigPilot Your initial problem was really not believing some performance metrics and thinking the Shares Added approach was a cause. I don’t see that being the case. Perhaps you need to elaborate on the performance measures you find yourself questioning and why.

All comments

[Deleted User]

@SkyPigPilot instead of using "shares added" action, use "buy". The contributions are made directly to your employer retirement plan as cash deposits and then the buy uses the cash for the purchase. Your checking account should not be involved in this process as the contribution is taken out before the net deposit.

q_lurker

@SkyPigPilot You say the Shares Added "seems to inflate the cost basis and gain/loss." Why do you say that? What value are you putting in for the 'Cost' of the added shares? As far as I know, that should be the preferable approach.

Using the "Buy" approach, you can choose the other option for the source of the funds - specifying an account, and then specifying the same account. That should not alter the cash amount in the account.

A third approach is to record the Cash deposit into the account using some Category of your choosing independent of the net payroll deposit you are recording in your checking account., and then letting the Buy use those deposited funds.

SkyPigPilot

@q_lurker Thanks for the reply. Regarding the cost basis, I'm not exactly sure why I think that, it just seems the numbers are off. Honestly I have not dug too deep into it. This is a federal employee Thrift Savings Plan account. The gain/loss percentage is 96%! These funds do pretty good, but not that good. I just suspected it might have something to do with the way I was entering the transactions.

I have transactions entered back to 2003. I was buying shares of three funds. In 2007, I sold/traded those shares in and purchased a lifecycle type fund, and I've been putting into that ever since. When I did those transactions in 2007, I recorded them as a sale and purchase. All of the "purchase" transactions are done as "shares added." Should I have done 2007 transactions as a some kind of exchange instead? Would that affect the performance numbers?

Forgive me, I know enough to not sound too dumb, but I feel I'm missing something obvious here.

Thanks!

SkyPigPilot

@CaliQkn Thanks for the reply. I'm not understanding what you are suggesting. The cash balance in the account is zero. How does the cash balance get bumped up to then use it for the "buy" of the shares? I feel like I'm definitely missing something obvious here.

Thanks!

[Deleted User]

@SkyPigPilot whenever you have a contribution to a retirement account, whether it be from the employer or your paycheck, a cash deposit is made to the retirement account. Then at the same time (usually) funds are purchased for the contribution that uses up all the cash.

q_lurker

@SkyPigPilot

This is a federal employee Thrift Savings Plan account. The gain/loss percentage is 96%!

All of the "purchase" transactions are done as "shares added." … Would that affect the performance numbers?

[Deleted User]

@q_lurker @SkyPigPilot as far as I know, contributions to a TSP plan are paid in cash. I haven't heard of any that deposit shares or make in-kind contributions. So I think the same should be done in Quicken.

For employer contributions or EE contributions, cash is deposited to the TSP account. On Quicken you would set up a category such as "Employer Contribution" or "Employee Deferral" but it depends on what type of ER contribution it is and how it's shown on the TSP statements. Once cash is deposited, fund purchases are made per the investment elections on file. This purchase of funds will use up the cash deposited from the contribution.

@SkyPigPilot you should have access to all your transactional information from an online account or a periodic statement. The best thing for you to do is emulate or mirror transactions from your online account or statements to your account set up on Quicken.

If you input the transactions correctly into Quicken the cost and gains and losses should fall into place. But usually cost is not be a concern for a tax deferred retirement plans.

q_lurker

[Deleted User]

@q_lurker you don't need to have the contribution set up in the paycheck wizard to deposit a cash contribution to a retirement plan. Simply just bypass the paycheck entirely and create the cash contribution deposit directly in the TSP plan.

q_lurker

SkyPigPilot

Thanks @CaliQkn and @q_lurker for all of the replies. @q_lurker I think you are correct that I was not believing, or more not understanding the performance metrics. If that is the case, then I will stick with the "add shares" function to do this. I receive my paycheck via DD and all of the deductions, including for the TSP have already been taken out. As you assumed, I don't want to go back and find the gross amount, or even just the TSP contribution and add it to my net pay, which is what I think I would need to do to use the "buy shares" correctly with the cash account. Even if that is not true, I'll stick with the shares added. I do go to the TSP site and get the precise contribution numbers, including number of shares, price, date, etc. Thanks again everyone for the help and discussion.

[Deleted User]

@SkyPigPilot you are welcome. Quicken is a tool for you to use and sometimes there is no wrong or right way but the way that work for you.