YNAB: periodic payments to investment account for retirement?

Question

TL;DR In YNAB monthly budget I want a category for my investment account and am looking for suggestions how to cleanly achieve this.

I am trying to achieve the following:

• Use You Need A Budget to track and plan my finances
• Save enough for retirement
• Invest the money I've allocated for retirement
• Every month, set aside the money I don't need now to my retirement

In YNAB, investment accounts are set up as tracking accounts. That means their transactions cannot have categories and do not reflect in my budget. However, as I want to transfer money to them every month, that is indeed part of my monthly budget.

In my opinion, that points to the "add a category for it". I also get all the perks of transactions belonging to a category - being able to set goals, budgeting my average "spending" (in this case, what can I afford not to spend) and so on.

Should I just mildly cheat and instead of using Investment Account (that is of tracking type) just use Savings/Merchant Account that do support categories? Or is there a solution already that I'm not aware of?

Answer 1

You don't want to set up your investment account as a savings or spending (budget) account. There are a couple of reasons. First, investment account balances change daily based on the market. If you set it up as a budget account, then your budget category balances would need to have money added or removed from them daily as the market value changes. Second, because you are investing for retirement, this money will be untouchable for many years; there is no need to include that in your spending budget.

Instead, enter your monthly investment amount as an expense transaction (not a transfer to another budget account). If, for example, you are sending $400 per month to your retirement account, just enter that as a monthly $400 expense out of your checking account, assigning it to a Retirement category. That money then leaves your budget.

If you want to see the value of your investment account in YNAB (so that your Net Worth is accurate), add the account as an investment account. The value will not affect your budget categories, but it will affect the net worth on the "All Accounts" page. Either set it up as an online account so that the balance will update automatically, or add it as a manual account and simply update the balance manually when you get your monthly statement.