In this post, I outline why even graduate students should open, and contribute regularly to, an individual retirement account, or IRA. Specifically, a Roth IRA. I also describe what an IRA is and what tax advantages if has to offer.
Making ends meet isn’t easy for many graduate students. Whether you’re balancing school and a full-time job, or are living on a stipend from a research or teaching position, chances are that money is tight. Most graduate students live on a lean budget out of necessity. But many also view that time as a temporary phase, and therefore neglect financial good practices like saving for emergencies and retirement. That’s for later, when you have a real job. Right?
That attitude was exactly how I thought about things for the first few years I was in grad school. Money management would be for later. When I would have that so-called real job, and, you know, actual sums of money to work with. I saw grad school as a phase that I just had to make it through before getting serious about my finances. And honestly, I thought I was in pretty good shape. I was lucky enough to have a research assistantship that had notable perks like tuition remission and health insurance. I was so excited to have those health benefits, it didn’t occur to me that there was one type of benefit that I didn’t have access to: an employee sponsored retirement plan. And I was not alone here. Retirement savings, it turns out, are not a huge priority for most students. One of the most compelling reasons to go to grad school is for that better job, and (hopefully) better paycheck on the horizon. Retirement is something to worry about when you hit that horizon.
The problem with horizons is you don’t reach them. Those who are constantly saying they’ll save/invest/get smart about money at a later phase in their life, usually find a seemingly perfectly reasonable excuse to keep pushing that later date further and further back. Even if you are living on a lean grad student budget, when you graduate isn’t actually a better time to start investing for your retirement.
So when is the best time?