Accounting for retirement funds

[Mike or Penny Novack]

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>>I just put them all into a single Income:Dividends:<401k holder> 
>>account on the theory that they are all treated the same in the end.
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>That makes sense to me. Thank you.
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This is actually tricky. The purpose of accounting is to be able to 
produce information that is useful to you. Sometimes that requires 
keeping books in different ways (multiple) and accounting for a 401k is 
just one of those.

You likely want to be able to determine how your account is doing (how 
well it is earning money) and for this purpose you don't want to 
consider the employer contributions as income. By the same token, for 
your personal books you do want to consider the employer match so that 
you can compare "total compensation package" but again it isn't income 
for tax purposes. At least not yet.

See the problem here is that a 401k plan is deferred deferred and even 
then the is conditional on how the money is eventually taken out. For 
example, should you select the "life annuity" option then what the plan 
has earned for you over the years will never be treated as income (but 
what you receive from the annuity will be). Similarly if you choose one 
of the the other options, it's only when you take the money out that it 
becomes "income" (the "before tax" contributions, the employer matches, 
and all that the fund has earned over the years). These are not quite 
the same thing (in the case of the life annuity option there isn't a 
direct connection between what the fund has and will earn and what you 
receive as income).

If you want more than the statements that the 401k administrator 
supplies to you I suggest opening a set of books JUST for the 401k. But 
how much sense that makes for an "investment" of such long term and 
whose actual net value is subject to so many conditional events is 
questionable (how old are you at the moment? did you just get laid off? 
what are you going to use the money taken out for? is this figuring for 
you or for your survivors? -- on one hand can be thought of "taxes" but 
on the other hand "net value of asset").

Michael D Novack, FLMI

-- 
There is no possibility of social justice on a dead planet except the equality of the grave.