Grad students should save for retirement

[pgher]

My son is a rising senior who plans on grad school. He noticed this column on IHE: Grad Students, Start Saving for Retirement Now

I would say, sure, they can do that and also buy a house if they just cut out the avocado toast. I mean, I think our grad assistantships are pretty reasonable, given the local cost of living, but there is NO WAY a grad student could live on $6k less.

This guy is assistant director of graduate employer relations at U. Chicago. One stipend value I was able to find was $31k (for AY19-20). That's higher than ours, but then again the cost of living in Chicago is higher than ours, too. I suppose if you're single and debt-free, it's possible to save something. But if you're trying to start a family (which seems common enough) and/or have debt (car, student loans), I just don't see it.

[dismalist]

My son is a rising senior who plans on grad school. He noticed this column on IHE: Grad Students, Start Saving for Retirement Now

I would say, sure, they can do that and also buy a house if they just cut out the avocado toast. I mean, I think our grad assistantships are pretty reasonable, given the local cost of living, but there is NO WAY a grad student could live on $6k less.

This guy is assistant director of graduate employer relations at U. Chicago. One stipend value I was able to find was $31k (for AY19-20). That's higher than ours, but then again the cost of living in Chicago is higher than ours, too. I suppose if you're single and debt-free, it's possible to save something. But if you're trying to start a family (which seems common enough) and/or have debt (car, student loans), I just don't see it.

This is the "never too early to start saving" mantra. Best to start prepartum, I suppose.

People's incomes tend to rise over their life times. Why anyone would want to save a lot from a low income rather than less from a higher income is beyond me. I think the self styled experts are playing with fear.

I would add that Social Security alone -- if one has worked a long time -- will provide for a decent to more than decent minimum if one owns one's own home.

By all means save a tad when young, perhaps to form a habit of savings. But buying a house is preparation for retirement, too. Wealth is wealth.

Don't let anybody scare you.

[jerseyjay]

Well, yeah. It wold be great if a graduate assistantship included contributions to a pension or 403(b) plan. And if the grad student is adjuncting somewhere, they should try to opt in to the pension system, if possible. (When I was a PhD student I taught at the local public university as an adjunct, and opted into the pension system. The actual contributions are minimal, but if I ever return to the system I am already vested in the pension, the employer's contributions would be higher, and I would be grandfathered into the tier I joined in the 1990s instead of the current tier. I don't have plans on returning to the public university system, but I have applied several times over the last 20 years.)

And if somebody has parents who has deep enough pockets, it wouldn't be bad to have them start a Roth IRA or something.

But the biggest things that a grad student can probably do to help their retirement is: avoid too much debt (especially consumer debt) and finish the degree and get a good-paying job. If everything goes as planned, and the grad student gets the doctorate, then a tenure track job, they may turn out okay. I think I am okay in terms of retirement, despite not having had a good paying job until relatively late--because my current position has pretty good retirement system and I maximize my contributions. But my fellow grad students who never got a tenure track job and are still adjuncting, do not even have the luxury of worrying about retirement, because they are worrying about rent.

Probably the best thing most grad students could do for their retirement is to drop out of grad school before they go too much in debt, and get a good paying job with a good pension. Of course, a huge percentage of workers do not have a good pension or even substantial 401(k) contributions.

[Parasaurolophus]

Our stipend was $21 500 CAD, which included one TAship. Out of which we had to pay 3-4k in tuition. So... yeah.

I had saved about 20k after 5 years, but I spent it all on the next two years, when my stipend ran out.

[mleok]

I think there might be an argument to be made for contributing to a 403(b) if there is an employer match, or to a Roth IRA, but that's probably the extent to which it makes sense.

[lightning]

I think that no matter how much or how little someone earns, it's always good to be in the habit of saving something, even if it's a small amount, just so it becomes a lifetime routine.

I have a colleague who, after he got his tenure-track job, didn't opt for the higher employee contribution in order to take advantage of the higher employer matching contribution to the retirement plan. (It's not a match here--it's more of a "multiplier," so he was really leaving money on the table.)

It's not that he didn't have the money. He just wasn't in the habit of saving, and he still had a graduate student's paycheck-to-paycheck bunker mentality, where he wasn't in the habit of saving.

After the first year on the TT, he realized his folly, and he changed to the higher contribution option. He regrets that mistake, but he said he was just too naive. This article would have steered him in the right direction.

[downer]

Generalizing for all grad students, who form such a heterogeneous group, is always going to fail.

Grad students now would be hoping to retire at what age? 70? 75? 80?

I think there's a pretty good chance that 50 years from now the world will have passed a tipping point of stability due to climate change and the international political chaos it will bring. And there are other looming crises -- more pandemics seem quite possible, for example.

How do you plan for political chaos and social breakdown? I'm not sure. Supposing the financial structures like banks and treasuries survive, it will probably be useful to have as much money as possible. So saving money could still be good practice now.

[jerseyjay]

Generalizing for all grad students, who form such a heterogeneous group, is always going to fail.

Grad students now would be hoping to retire at what age? 70? 75? 80?

I think there's a pretty good chance that 50 years from now the world will have passed a tipping point of stability due to climate change and the international political chaos it will bring. And there are other looming crises -- more pandemics seem quite possible, for example.

How do you plan for political chaos and social breakdown? I'm not sure. Supposing the financial structures like banks and treasuries survive, it will probably be useful to have as much money as possible. So saving money could still be good practice now.

But that's true for everybody: Man plans and God laughs.

I mean, I am in my mid-late 40s, and am expecting to have another 20 years, more or less, of work. It is possible that I will get hit by a bus tomorrow and not make it to classes next week. It is also possible that my school will go bankrupt and I will be looking for work and need to cash in my retirement funds. But it is possible that a doctoral student will die before finishing his dissertation. Or win the lottery. All planning is futile, in the last instance, but it doesn't mean that it is pointless.

[Caracal]

I'd also say that there are trade offs which should be considered. Grad school is a lot more pleasant if you don't live in a hovel with 4 roommates. I was lucky enough to go to grad school in a pretty affordable city, but having a reasonably nice apartment was important to me. I also spent a lot of money at the local bar, but it was fun, a lot more pleasant than just going home alone at the end of a long day of work and it was part of building close friendships that made my time in grad school far less isolating than it could have been.

[Volhiker78]

Can't argue against the advice to start saving early for retirement.

Where it becomes crucial is to start saving aggressively once you get your first job.. I have strongly advised two recent PhD's who went into industry  to put the maximum amount possible into their retirement accounts.  The reason is that there is no tenure in industry and very few companies have a pension program anymore.  Also,  there is a tendency in industry to 'force out' technical people in their early 50's. You don't want to get to 50 with an underfunded retirement account.   

[Sun_Worshiper]

Saving is a good habit to get into, but the reality is that you cannot meaningfully save for retirement on $15k a year (or whatever), even without avocado toast. Grad school is an investment in yourself, which can in turn bring you higher income. From there you should be in a position to save for retirement.

Some of the other advice in this thread is good though.

[dismalist]

I think there's a pretty good chance that 50 years from now the world will have passed a tipping point of stability due to climate change and the international political chaos it will bring. And there are other looming crises -- more pandemics seem quite possible, for example.

How do you plan for political chaos and social breakdown? I'm not sure. Supposing the financial structures like banks and treasuries survive, it will probably be useful to have as much money as possible. So saving money could still be good practice now.

Under such conditions only gold makes sense as a savings medium. :-)

[pgher]

Saving is a good habit to get into, but the reality is that you cannot meaningfully save for retirement on $15k a year (or whatever), even without avocado toast. Grad school is an investment in yourself, which can in turn bring you higher income. From there you should be in a position to save for retirement.

Some of the other advice in this thread is good though.

Agreed, absolutely. The article's advice was basically, save 20% of your poverty-level income. That strikes me as ridiculous on its face, so much so that nobody will catch the underlying good advice to save whatever you can (after dispatching debt).

[marshwiggle]

Saving is a good habit to get into, but the reality is that you cannot meaningfully save for retirement on $15k a year (or whatever), even without avocado toast. Grad school is an investment in yourself, which can in turn bring you higher income. From there you should be in a position to save for retirement.

Some of the other advice in this thread is good though.

Agreed, absolutely. The article's advice was basically, save 20% of your poverty-level income. That strikes me as ridiculous on its face, so much so that nobody will catch the underlying good advice to save whatever you can (after dispatching debt).

I think the danger is that human nature is to always move the goalposts.

• "I can't save any money as a grad student."
• "I can't save any money as a post-doc."
• "I can't save any money with my entry-level job."
• "I can't save any money while I'm still paying off debt."

etc.

On the other hand, if one gets into the habit of saving something, even if it's something like 5%, it's going to be more automatic to increase the amount each time one's income increases, even if it's only by a little.

[dismalist]

Paying off debt is saving! [Consumption is less than income.]