Retirement saving options?

[pterosaur]

I've been putting money into a Roth IRA for a couple of years and wanted to continue in graduate school. The problem is that only "earned income" counts for this, and I received a federal fellowship for my PhD that counts as "unearned income." (Which is a BS term - suddenly I'm not earning it because I'm doing the same thing with money from a different source? Grr.) But this means I can't contribute to my Roth IRA retirement account.

So I'm curious what other options people have used for retirement savings, if anything.

[Edotdl]

Probably just a personal investment account. Although you lose out on the tax benefits from a retirement account, it's better than nothing. I also totally agree that the "unearned income" from fellowships is complete BS. You could try to find a side job/TA just to make the $5500 to put into a Roth IRA.

Edited April 22, 2016 by Edotdl

[pterosaur]

My PhD program forbids outside work (if they know about it...) and if I TA, my fellowship subtracts the money I earn from my stipend. I guess everyone wants me focusing on my research and not saving for retirement. 

[biochemm]

I'm a Canadian in the US, so my situation is even weirder, but I've heard either an education savings fund (if you plan on having a kid) or doing some wacky workarounds with HSAs might give you some tax avoidance. I think there are a fair number of resources on google and whatnot. Interested to see what else people can think of here.

[TakeruK]

I'm also a Canadian in the US and I'm not certain I'll stay here so I am not locking my savings up in US investments. My current plan is to put them in savings accounts until I go back to Canada, where I can contribute to RRSPs. These are like Roth IRAs, except you don't need to put employment income in them. Instead, each year, as you work, you get some amount of dollars (a fraction of your employment income) added to your contribution limit and you can carry over contribution amounts from past years. Although working in the US does not add to my contribution limit in Canada, I had worked in Canada before (and not had savings to contribute) so I plan on dumping as much as I can into my RRSP when I return to Canada. RRSPs also provide a tax break so it also makes more sense for Canadians to defer their RRSP contribution to a time where the tax shelter is more beneficial. The idea is that if you aren't making that much income where the tax break would be helpful and you know that you'll make much more money later (i.e. postdocs will pay a lot more than a grad student), then it's better to pay taxes on the investment income on that money now while you're in grad school, since the tax won't be that much and then get your tax shelter later, when you are earning much more. 

For pterosaur's case: Check with your school's benefits office. Part of our grad student benefits package include sessions with a financial advisor. At my school, grad students are not eligible for any plan in which the school also contributes or matches contributions. However, we can contribute to a 403(b) plan, but the university does zero matching. However, you do need to be receiving W2s in order to contribute (our RA/TA work results in W-2s, but our fellowships are paid by 1099-MISC [for Americans] and 1042-S [for International students). Unfortunately, if your entire income is the fellowship, then I don't think you'd be eligible for these retirement plans.

But you don't need these fancy retirement plans in order to save for the future. They do provide a nice tax shelter (I think you don't have to pay taxes on your contribution to a 403(b) plan) but maybe it will also work out for you to just invest it in some other investment plan and then move the savings to a retirement plan later on? (i.e. if you manage to save up a bunch of money now, then when you do earn employment income, you can use that new employment income to get to the maximum contribution allowed by Roth IRAs and other plans and then use your savings to pay for your expenses then).