How to deal with RRSP's (Canada)

lejohnston lejohnston at dccnet.com
Wed Jan 3 00:59:19 EST 2018 

Victor, Dave,

Thanks for your help. At this point my file is not very large and my new RRSP file will be quite small, so I think I will give this approach a try.

Larry


On 01/02/18 06:08 PM, "R. Victor Klassen"  <rvklassen at gmail.com> wrote:
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> 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.
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> 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).
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> > On Jan 2, 2018, at 8:49 PM, lejohnston <lejohnston at dccnet.com> wrote:
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> > Hi,
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> > 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.
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> > 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.
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> > Thanks for any further insights.
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> > 
> > Larry 
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> > 
> > 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
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