How to deal with RRSP's (Canada)
R. Victor Klassen
rvklassen at gmail.com
Tue Jan 2 21:08:54 EST 2018
I kind of like your approach - thus far I’ve tracked my retirement accounts outside of GnuCash, which is similar. The only pitfall I can see is if your gnucash file gets at all large, the time it takes to open a file gets long. And having multiple files means the file-open delay whenever you switch.
You don’t get a true calculation of Net Worth - but you can take the result of Net Worth as calculated in each of the two files and sum them (by hand if need be).
> On Jan 2, 2018, at 8:49 PM, lejohnston <lejohnston at dccnet.com> wrote:
>
> 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
>> > --
>> > Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html <http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html>
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