Are you saving for retirement while in grad school?

[brown_eyed_girl]

I'm about to start a 7-year PhD program, which means that by the time I graduate I'll be in my early 30s. It's a funded program and my stipend will cover basic modest living expenses, but there won't be much left over for savings of any kind. Of course I expect to have other fellowships/work opportunities at some point along the way, but regardless I doubt if I'll be saving much while in school. As a fairly fiscally responsible person, it's a little scary to think about coming out on the other side of my degree without any significant retirement savings, etc. Which brings me to the question, do you contribute to an IRA or other savings account during grad school? Any tips on grad student financial security? Obviously I'm not pursuing a PhD in the humanities for the money (hah!), but I'd love suggestions/insights on what has worked for you guys.

[aberrant]

If I had money for the down payment, I would have pay mortgage for a condo in my area, and rent it out (as an investment) when I graduate -- mortgage payment is cheaper than rent in my area, since 2012.

 

I know some people have stocks of various companies, but most of them are financially too conserved to do any long term investment. Just imagine how much can you save per month, and then how much money do you need to spend per semester, specifically for school activity/facility fees, and, to some others, insurance.

[rising_star]

Try to set aside 10% of your paycheck for a combination of savings and retirement. You want a rainy day fund for emergencies (car repairs, you get sick, animal gets sick, relative dies and you need a last minute flight home, etc.). But, any money you can save toward retirement now would be helpful long-term. For most grad students, a Roth IRA makes the most sense since you can put in after-tax dollars and you're unlikely to make that little money again.

[Adelantero]

I'm coming off of a seasonal gig that paid really well and my expenses should be low until I start school in the fall. I'm also getting a pretty good stipend. Since my seasonal job was at sea, where I had 0 expenses, I started throwing a tiny bit of money into the stock market just to get a feel for how it works and what to look for. I've done poorly. Which is a great lesson in different ways, but I think eventually it will make me some money. Again since I'm sitting on cash for the first time ever, I've been trying to figure out what to do with it to make it do work for me, and so I put a bit into a mutual fund too and am trying to look at other options. Maybe this is a good idea, maybe not. I'm probably not going to put anything in a retirement account for the time being because if things go south, I want to have access to my money until I have a stable job. But if you can afford to invest somewhere, it's probably worth it. Even if it's just a little each month or each semester.  I get the feeling people rarely get wealthy by starting late.

[rising_star]

aberrant, many places have first-time homebuyer programs which will allow you to have a lower down payment. That and FHA loans are two options you might want to consider if a mortgage would save you significantly over rent. I looked into both when I started my PhD program and regret not pursuing them as I could've sold for more money than I paid in all likelihood.

 

Adelantero, I recommend looking into no-load mutual funds with a good return over the last 1 year, 5 years, and 10 years. Vanguard and T. Rowe Price are two popular companies. 

[TakeruK]

I am putting money aside (about 10% of income) for the future, but they are not in any official retirement fund for two reasons: 1) I'm a Canadian in the US now and I don't plan on retiring in the US so I don't want to deal with the complications of having US income later on in life and 2) In Canada, contributing to registered retirement fund in a given year reduces your taxable income by the same amount that year. You earn contribution room based on annual income (that carries over indefinitely) so I'm currently putting my savings in a "normal" savings account and when I start to make income in Canada, I'll move that into a retirement savings account and get a big tax break.

[brown_eyed_girl]

Good ideas, everyone! I wonder whether 10% will be feasible as a grad student in an expensive city like NYC - sadly it seems hard to do on a 30k stipend, but I'll certainly try. Investing in real estate there also isn't really an option for me (I wish!). Like Adelantero, I'm also torn between wanting to make long-term investments and wanting to have cash readily accessible since my income will be very limited for the next few years and you never know when there will be expenses. Low-risk options like mutual funds are definitely a good suggestion. 

[Aroma Black]

I'm saving a significant portion of my stipend working under the assumption that the years between the end of the initial university stipend and the start of a good job (knock on wood) will be the leanest I have to face.

[brown_eyed_girl]

I'm saving a significant portion of my stipend working under the assumption that the years between the end of the initial university stipend and the start of a good job (knock on wood) will be the leanest I have to face.

 

That sounds like a prudent approach. What kind of account are you using, if I may ask?

[TakeruK]

I'm saving a significant portion of my stipend working under the assumption that the years between the end of the initial university stipend and the start of a good job (knock on wood) will be the leanest I have to face.

 

Maybe this can really be field dependent, but I can't see any future job paying less than what graduate students are paid! Although if I am unable to find work then this could definitely be an issue. However, in my program, people tend to remain as a graduate student until they find a job (i.e. a graduation date is normally set shortly after they get a job offer). Also, my school has "extended graduate student status", which allows students that graduate (in June) to keep working and remain paid / keep their benefits over the summer if their next job does not begin until the fall. It's a win-win situation because the new PhD does not have to go a few months without pay (it would be hard to find a job for only 3-4 months) and the school/supervisor gets a "postdoc" level worker at the price of a graduate student!

 

So these are things worth looking into as well when making post-graduation financial plans. I only found out about this option when people I knew in the department started to graduate but then stick around for the summer!

[brown_eyed_girl]

@TakeruK I'm not sure what Aroma Black's specific situation is, but in a lot of fields if you hope to go into teaching, it may be hard to find an academic job for a while and/or you may spend several  years in poorly paid adjunct/postdoc fellow roles that don't include benefits. I certainly hope I'll be making more than my stipend after graduation, but it wouldn't be a bad idea to prepare for the worst. 

[Aroma Black]

That sounds like a prudent approach. What kind of account are you using, if I may ask?

 

Mostly savings (ugh), but also Roth IRA. If you open your Roth IRA early enough, you can draw down the principal without taking any hit (see http://www.cnbc.com/id/101323957). It's a little tough because you can't contribute directly from any part of a graduate student stipend that doesn't count as earned income (even taxable fellowships may not count as earned income). But I will use savings first as necessary and dip into that if I have to. So I'm doing "saving for retirement" and "saving for a year without a fellowship" at the same time.

 

In humanities at my school we're guaranteed five years, and then we aren't forced to graduate when we don't have jobs lined up, much like TakeruK, but we aren't guaranteed continuing funding or work either. If a round of fellowship applications goes badly things can get difficult fast. Luckily I'm now assured of a sixth year of funding and I'll have another chance to apply for some fellowships before things run out, but who knows.