Saving for retirement as a regular adult is hard enough, but for grad students, saving any money can seem next to impossible.
Whether you’re a Ph.D., masters, medical, law, or business student, graduate school is tough and can mean a load of debt.
Even for students with stipends, you’re not going to be making a six-figure salary. It varies widely on the university and the field, but most stipends are in the high four-figure to low five-figure range.
As a grad student, you’re just trying to survive and eat three meals a day – how can you possibly save money and invest for retirement? It’s certainly not easy – but hey, you’re a grad student! You’ve already proven you’re a hard worker! Time to put that big brain to work and learn how to save for retirement as a grad student.
Advice for grad students and other adults
Before you start investing for retirement, your priority should be to have an emergency savings account. The approximate amount should cover 3-6 months of living expenses. (Though, as COVID has taught us all, the more savings you have, the better.)
This is not money you dip into when your program cohort wants to jet to Asia for a week (cough, B-school students, cough). It’s money you’ll never touch – hopefully. Unless something bad happens. Then you’ll be glad you have it.
You can keep your emergency money in a regular savings account, a money market account, or a certificate of deposit.
The Golden Cherubs – No debt grad students
The gods have shined upon you. Through your remarkable intellect, charming good looks, or amazing connections, you’ve received a scholarship/fellowship/grant money/grandparent’s money for graduate school.
Whatever the situation, you’re getting your education sans debt.
For those with income
If you’re receiving a salary as a grad student, you may be able to deposit a percentage of that money into an individual retirement account. However: you can only contribute to a Roth IRA with taxable income. How can you check if your fellowship money is considered income? If the money you get from school comes with a W-2 form during tax season, then it’s IRA eligible.
For married peeps who file taxes together, if your grad money is considered non-taxable income, you can set up a spousal IRA and save for retirement that way (as long as your partner earns taxable income). #marriageperks
If you’re not married and you want to invest, you could open a taxable investment account, known as a Roth IRA, and earn a return on your dollar that way.
To learn more about saving for retirement, check out these articles:
For those without income
If you’re a grad student who got a full-ride to school but is still paying out of pocket for living expenses, saving doesn’t seem like a realistic option.
There are a couple of things you can do:
1. Side job – there likely won’t be a lot of extra money floating around, but any spare dollars you make, you can put towards an emergency savings fund and, later, into an IRA
2. Open a 529 savings account for yourself – a 529 savings account allows you to save and invest money tax-free and spend it towards any eligible education purpose. For some states, any money put in can receive a state tax deduction (aka you get money back), and for everyone, the money taken out of the account is tax-free.
3. Interest earned from nest egg – if your emergency savings are in an account that earns a modest return (likely 1-3%), withdraw the earned interest and place it in a taxable investment account. Even if it’s a silly low amount, it will at least get the investment ball rolling.
Falling in the mud pit – Grad students with debt
If you’re taking out student loans to pay for school, you’re not alone. According to Student Loan Hero, 40% of the US’s $1 trillion student loan debt has been used to pay for grad school.
In this scenario, saving for retirement is on the low end of the priority list. From a financial perspective, the main things to focus on are avoiding credit card debt and not taking out more student loans than absolutely necessary. If you work part-time, focus on building your emergency fund and limiting how much you take out in loans.
For more tips on saving money, check out these articles:
- How to Avoid and Get Out Of Credit Card Debt
- High-Interest Saving Accounts
- How to Know You’re Ready to Start Investing
RECAP
It’s not easy to save, let alone save for retirement as a grad student. Priorities: tackle building an emergency fund first. Then focus on starting a retirement account. Put in a little bit each paycheck or month. The point of investing as a grad student is to build investing habits and confidence so when you really start making money, you’ll already know what you’re doing.
