unofficial microsoft.public.money FAQ and A
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Q) How do I setup a 401(k) loan?
A) There's no magic method (i.e., no "401k loan wizard.") Here's how I do it:
1) In 401k investment account, sell investments as required by the plan mechanics to 401k cash account to make funds available.
2) In 401k cash account, "buy" a new "loan" money market investment in amount of loan amount.
3) Create a new "loan" account with amount and terms of 401k loan.
4) Schedule a periodic loan payment from 401k cash account to pay off the loan. This is like any other loan in Money.
5) Revise periodic scheduled paycheck deposit to add an after-tax split item to transfer the loan repayment payment amount to 401k cash account.
6) Revise periodic scheduled investment from 401k cash account to 401k investment account/investment options as required by the plan mechanics to reinvest the loan payment amount.
7) At each loan payment to the 401k cash account also enter an interest paid from the "loan" investment in the 401k investment account to the 401k cash account and a "sell" of "loan" from the loan investment in the 401k investment account to the 401k cash account. This is the worst thing since there is no way to automate it and you have to get the principal and interest appropriate to each period from either the "loan" account payment entries or a separate amortization table. (Mine's in Excel.)The loan balance amortizes from the modified paycheck transfer via the 401k cash loan payment account. The holdings in the money market "loan" investment decline and earn interest via the manually entered interest and sell transactions. The funds get reinvested via the revised periodic investment transaction.
It's just a lot of work and a lot of transaction entries.
There are "lighter" schemes depending on how much detail you go into tracking your 401k investments. The scheme outlined above is the manic geek case for personal accounting anal-retentives. One light weight scheme is listed in the MSKB.
Thanks to Richard M. Bollar - MVP Microsoft Money for this method.
References:
MSKB: 223174 401(k) loans the MSKB way
Please see this disclaimer if you are using Money 2005 or this comment if you are using Money 2006.
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Last update: 10 December 2006 |
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