Quicken, the TSP and cost basis

[Jonathan]

Hello,
I use Quicken to track my TSP portfolio (e.g. prices and transactions). It's set up as a 401k.

Now, when a paycheck is logged, Quicken automatically takes the appropriate pretax sum (plus employer contribution) and puts it into my TSP account as cash. I then manually "buy" the appropriate amount of shares, at the appropriate price, using my account balance at www.tsp.gov as a reference. So far, so good.

The problem comes in with interfund transfers. When shares of one fund are "sold" and shares in another are "bought", the cost basis is reset to whatever the most recent total purchases cost. If I've put $5000 into my account total over the years, but recently I moved all $6000 of my current assets from the G-Fund to the I-Fund, Quicken now says the cost basis is $6000 and chalks the extra $1000 up to "realized gains".

Is this the way this is supposed to work? My understanding of "cost basis" in this instance is that it's supposed to be the amount you put in to the account. If what Quicken is doing isn't right in the instance of the TSP, there any way to avoid this?

 

[tsptalk]

Welcome Jonathan! I don't use Quicken but here is a link to posts where Quicken is discussed.

http://www.tsptalk.com/mb/search.php?searchid=288523

 

[rokid]

Check the definition of "cost basis" in Quicken Help. Based on that definition, Quicken appears to be operating correctly.

 

[Jonathan]

Check the definition of "cost basis" in Quicken Help. Based on that definition, Quicken appears to be operating correctly.

Thanks, rokid. What Quicken is doing does make sense to me from the standpoint of a retirement system that consist of actually buying and selling stock.

I guess what I'm wondering is whether or not this makes sense in the context of the TSP, with its pseudo-stock funds.

It's not that what Quicken is providing is useless, by any means: it does give you average annual returns, which is extremely valuable, and it's certainly possible to derive overall gains based upon your TSP contributions and the current value of your account.

I strongly suspect that my lack of experience with Quicken is causing some of my consternation Plus, I'm an engineer, not an accountant. Probably makes things worse.

 

[Jonathan]

OK, I've looked into this more.

"Cost Basis", as I understand it, really isn't relevant to 401k's (including the TSP). It's a matter for taxes on mutual fund dividends (capital gains), whereas the TSP, like 401k's, uses pretax income as inputs and is taxed on later distributions as income.

So whether it's "right" or "wrong" in this instance doesn't really matter. What matters, at least to me, is the average annual rate of return. Oh, and keeping track of the accounts in the first place.

It could be that Quicken is only presenting cost basis in this instance because I've set up my TSP account funds as "mutual funds". This seems to be the way everyone does it, but I wonder if there's a better way to go. Or maybe I could just ignore the "cost basis" numbers.

I'll have to look into that.