|
Posted by TomYoung on February 5, 2009, 10:29 pm
Please log in for more thread options > In Quicken or Quickbooks I would like to enter a Retirement Annuity. I
> have one and out of it will come two deductions. One for medical
> insurance and the other for federal income tax deduction each month.
> An annuity is an "Income" which does not end until death. However that
> is a "Category" not an account. I need to know how to properly set up
> an account for an annuity. Only from an account can you split and
> designate different catagories. I am presently using Quicken however
> have purchased Quickbooks. I do not know if Quickbooks is any
> different regarding setting up an account. Have not loaded it into my
> computer as yet.
>
> However in Quicken when setting up an account here are the choices:
> If I choose a bank or investment firm from the drop-down list I then
> get a pop-up that will ask me for more choices.
> The two major headings under ACCOUNT are Cash Flow & Investment which
> would come the closest of choices.
> Under Cash Flow the list to check are Checking, Savings, Credit Card,
> Cash
> Under Investment the list to check are Brokerage, IRA/Keogh, 401,
> Single Mutual Fund
>
> It does not appear that any of these choices really fit very well and
> am still kind of in a quandary regarding how to set up and account for
> an annuity. If you can help me with this I would really appreciate it.
> Not real important but something I would like to enter to get a
> picture of my entire finances to properly set up a budget etc..
>
> P.S. From a Catagory (Income) you cannot separate out deductions. That
> can only be done from an ACCOUNT! =A0Any help will be appreciated.
Annuities are valuable but it's difficult to put a value on it. If
you live to be 100 it's very valuable, it you die tomorrow it's not
worth a lot. (I'm assuming that this is a single-life annuity with no
guarantee.) If it's a fixed annuity you could make a discounted cash-
flow calculation based on some assumptions of relevant interest rate
and your life expectancy. If it's a variable annuity you can make the
same calculation with the added complexity of variable rates of market
return and cash flow.
I'd like to understand what you're trying to accomplish here and more
background as to how you came to be in this position.
Ignoring the issue of the "cost" of the annuity, from the simplest
standpoint you're receiving a check every month, sort of like a
paycheck, and you could simply account for it as such. That is you
deposit the check in your bank account and do the accounting
appropriately. So, if you receive a check for $1,000 from which $100
has been deducted for taxes and $100 for medical insurance you'd make
the following entry:
Dr. Bank Account $1,000 (Increase bank account)
Dr. Med. Ins. Exp $ 100 (Increase med ins category)
Dr. Fed Tax Esp $ 100 (Increase fed tax category)
Cr. Annuity Income $1,200 (Increase annuity income)
(=93Annuity Income=94 is kind of a misnomer because technically you=92re
getting some of your own money back =96 a reduction of basis =96 and
you=92re receiving an interest element..)
If you just bought the annuity and want to account for the cash
outflow, that's easy: create an Annuity Account and put the cash in
there.
It's the subsequent accounting of cash flows out of the account that
becomes a little more difficult. By "difficult" I mean difficult from
the standpoint of calculation because each check you receive
represents a return of "principal" (that's the amount the annuity
asset decreases) and an interest income element (that falls out of the
"discount" calculation I mentioned above) and the amount of principal
and interest changes with each check. Then, you have to "gross up"
the net check you receive to account for the Federal Tax and Medical
Insurance deductions.
Either Quicken or Quickbooks is perfectly adequate to do the
accounting which ever way you choose to do it and the insurance
company issuing the checks will most likely do most of the accounting
for you.
Tom Young
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap