How to deal with RRSP's (Canada)

[lejohnston]

Hi,

Last year I treated the RRSP as an asset and contributions as transfers from a Savings Account to the RRSP account. I think this is in line with what Dave is saying.

Although as you say contributions are tax deductible, earnings are tax-deferred; withdrawals are taxable I am not especially concerned about tracking that (my finances are fairly simple and I am not in any danger of exceeding any limits). My main concern is related to my budgeting especially when I start to draw down on the RRSP. If I merely transfer money from my RRSP to my checking account then I don't see how it becomes available in my Budget. That is why I was thinking it would be advantageous to treat contributions as an expense, similar to a pension contribution and to track it in a separate GNUCash file and then when I draw it down it would be an expense in the RRSP file and Income in my Main file. That seems simpler to me but I wanted to make sure I was not making creating other problems.

Thanks for any further insights.

Larry 

On 01/02/18 05:08 PM, "R. Victor Klassen"  <rvklassen at gmail.com> wrote:
> 
> The remaining unanswered question, which I think is part of the original question, is what to do about withdrawals being treated as taxable income?
> For those in the US, an RRSP is roughly equivalent to an (non-Roth) IRA. Contributions are tax deductible, earnings are tax-deferred; withdrawals are taxable.
> 
> So I think the question is, how to account for contributions to a tax-deferred account - not really expenses, but they do change current taxes owed - and distributions: while it is truly a transfer from one asset account to another, the distribution is treated as income by the taxing authorities.
> 
> > On Jan 2, 2018, at 6:36 PM, DaveC49 <davidcousens at bigpond.com> wrote:
> > 
> > Larry,
> > 
> > I'm not familiar with the details of RRSP accounts in Canada so any comments
> > here are general in nature and not taken as accounting advice per se. 
> > 
> > If it is a retirement savings account you would treat it as an Asset.
> > Depending upon the conditions associated with withdrawal of funds from the
> > RRSP you would most likely classify it as either a long term fixed asset or
> > a current asset. For personal accounting this distinction is not as
> > important as in business accounting, but can be still useful. (You could
> > simply record eveything just under Assets if you wished and this met your
> > requirements). 
> > 
> > If you can withdraw funds at any time at your discretion, then you would
> > normally classify it as a current asset otherwise as a fixed asset. If there
> > are rules about how much you can withdraw and how often in the future, you
> > could continue to classify it as a fixed asset when you gain ready access to
> > the funds at some future time. If the funds become freely available (on
> > retirement for example), you could reclassify it as a current asset at this
> > point in time. This simply requires having placeholder subaccounts for
> > Fixed Assets and Current Assets under your Assets top level account and
> > changing the parent account for your RRSP from Fixed Assets to Current
> > Assets for example. It will just change what heading it appears under on the
> > Balance Sheet
> > 
> > If you are paying into the RRSP yourself, you are not creating an expense
> > when you transfer the money even though it may actually go to whoever holds
> > and maintains the RRSP account (it may be your bank for example) as you
> > still retain ownership and the right to access the funds in the future.
> > 
> > You are in this case exchanging one asset (cash in your bank account) for
> > another asset (the increase in the balance of the RRSP), so there is no
> > expense component of the transaction. The basic transaction will be:
> > 
> > Debit 
> > Credit
> > Asset:Bank:CheckAccount 
> > xxxx
> > Asset:RRSP xxxx
> > 
> > 
> > 
> > If you select double line mode (Menu->View->Double Line) when you click on a
> > transactionof this type in an account register e.g. your RRSP account
> > Register you should lines corresponding to both of the above components.
> > 
> > Interest should be recorded as:
> > Debit 
> > Credit
> > Asset:RRSP yyy
> > Income:InterestRRSP 
> > yyy
> > 
> > Whether that interest is taxable or not under your local legislation will
> > determine whether you classify it under TaxableIncome or NonTaxableIncome.
> > 
> > When you withdraw funds from the RRSP to your bank account, the transaction
> > will be the same as the deposit above with a reversal of the debit and
> > credit entries,i.e.:
> > 
> > Debit 
> > Credit
> > Asset:Bank:CheckAccount xxxx
> > Asset:RRSP 
> > xxxx
> > 
> > Hope this helps with the recording of your RRSP. If your records are in
> > anyway critical (e.g. tax and legal implications) it would be advisable to
> > seek professional advice locally.
> > 
> > David Cousens
> > 
> > 
> > 
> > -----
> > David Cousens
> > --
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