Author Topic: Grad student, no 403b/457b available, almost done maxing out Roth, what next?  (Read 4966 times)

DSA

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I've just started as a grad student this summer, and want to know what I can do to prepare for retirement (hopefully an early one). I've almost maxed out my $5500 contribution to a Vanguard Roth IRA, and my university does not provide a 403b/457b for grad students (I had posted a while back, thinking I could do that but the sad news was broken to me today by the school's business office). I have about $35k in a savings account from my time in industry before going back to school, and it feels like there's something I should be doing with it more than just letting it sit there.
I also have $7200 in a Schwab SIMPLE IRA from my old job (opened October 2012, and I left the job in April 2014). Not sure what to do with this or when -- I'd like to roll it into my Vanguard account but am unsure of how that works.
My current take-home pay as a research assistant is about $1600/month, and I'm saving to the point that I can pocket $200-400/month of that in my savings. I think I've got a good amount as an emergency fund, so is there anything I can do to make good use of the extra?

MDM

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DSA, congratulations on admissions to grad school - and the good financial sense you've shown thus far.

One thing about grad school funding: not only will you not be eligible for 403b, it may not be eligible to use for IRAs either.  Check with your school (and see http://www.evolvingpf.com/2012/03/earned-income/ and http://www.bogleheads.org/forum/viewtopic.php?t=50574 if you need background).

While your taxable income is low (especially if you will be in the 0% or even 10% marginal tax bracket), you might convert your SIMPLE IRA to a Roth. 

Otherwise, hit the books, do well, and then make good use of that education!

DSA

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Thanks for those links. I don't have a fellowship, and my employment as a graduate research assistant has earned income (with W-2s). So it looks like I'm good on that front.

I'll start planning to roll over my SIMPLE IRA to a Roth -- but I also have read about SIMPLE IRAs having a two-year waiting period. Do I need to wait until after October 2014 (two years after my first contribution to the SIMPLE IRA)?

Gin1984

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You can always invest in taxable accounts for the time being, though I would keep the money you need to use to move in cash (I assume that like most grad students you'll move after graduation).

BlueLesPaul

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SIMPLE IRA cannot be transferred to a traditional IRA without penalty and cannot be transferred to a Roth IRA during the two year period.  I have a SIMPLE as well, and it is an awful plan with high fees and a back end load.  You can transfer it to another SIMPLE and then transfer it to a Roth once the two years are up from the first contribution to the first plan.

Gin1984

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SIMPLE IRA cannot be transferred to a traditional IRA without penalty and cannot be transferred to a Roth IRA during the two year period.  I have a SIMPLE as well, and it is an awful plan with high fees and a back end load.  You can transfer it to another SIMPLE and then transfer it to a Roth once the two years are up from the first contribution to the first plan.
That is not true!

Louisville

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Gin, would you like to elaborate?

BlueLesPaul

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quote author=Gin1984 link=topic=19980.msg332362#msg332362 date=1404246082]
SIMPLE IRA cannot be transferred to a traditional IRA without penalty and cannot be transferred to a Roth IRA during the two year period.  I have a SIMPLE as well, and it is an awful plan with high fees and a back end load.  You can transfer it to another SIMPLE and then transfer it to a Roth once the two years are up from the first contribution to the first plan.
That is not true!
[/quote]

Sorry, I should have clarified that they can be transferred without penalty to a traditional IRA after the two year window.

TomTX

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SIMPLE IRA cannot be transferred to a traditional IRA without penalty and cannot be transferred to a Roth IRA during the two year period.  I have a SIMPLE as well, and it is an awful plan with high fees and a back end load.  You can transfer it to another SIMPLE and then transfer it to a Roth once the two years are up from the first contribution to the first plan.

I rolled my SIMPLE IRA into a traditional IRA, after the 2 years was up.

...and I don't know how you got such a shitty plan. I set up the SIMPLE IRA for my first (real) job with Vanguard, and they charged NOTHING. No fees, no load, just the regular fund expenses. Have you talked to HR about moving to a non-shitty custodian?

TomTX

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My current take-home pay as a research assistant is about $1600/month, and I'm saving to the point that I can pocket $200-400/month of that in my savings. I think I've got a good amount as an emergency fund, so is there anything I can do to make good use of the extra?

Dump it in Vanguard as a taxable account. I would personally go Total Stock Market.

La Bibliotecaria Feroz

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What to do with your savings depends on what your goals are. Do you want to buy a house after you graduate? If so, then you might want to keep the money somewhere safe-ish (http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/). If you have no immediate plans to do that, then sure, go ahead and open a taxable brokerage account.

When I was in grad school, I knew I wanted to buy a house after graduation, so I put my money in a CD, using BankRate to find the highest national interest rate.

Another option is if you plan to have children, you can open a 527 plan in your own name and then later transfer it to a future kid.

(FWIW, I consider premature house-buying to be a huge mistake, so don't even think about it unless you already know you love a particular city and want to live there forever.)

Gin1984

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What to do with your savings depends on what your goals are. Do you want to buy a house after you graduate? If so, then you might want to keep the money somewhere safe-ish (http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/). If you have no immediate plans to do that, then sure, go ahead and open a taxable brokerage account.

When I was in grad school, I knew I wanted to buy a house after graduation, so I put my money in a CD, using BankRate to find the highest national interest rate.

Another option is if you plan to have children, you can open a 527 plan in your own name and then later transfer it to a future kid.

(FWIW, I consider premature house-buying to be a huge mistake, so don't even think about it unless you already know you love a particular city and want to live there forever.)
529 plan, not 527.

La Bibliotecaria Feroz

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What to do with your savings depends on what your goals are. Do you want to buy a house after you graduate? If so, then you might want to keep the money somewhere safe-ish (http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/). If you have no immediate plans to do that, then sure, go ahead and open a taxable brokerage account.

When I was in grad school, I knew I wanted to buy a house after graduation, so I put my money in a CD, using BankRate to find the highest national interest rate.

Another option is if you plan to have children, you can open a 527 plan in your own name and then later transfer it to a future kid.

(FWIW, I consider premature house-buying to be a huge mistake, so don't even think about it unless you already know you love a particular city and want to live there forever.)
529 plan, not 527.

Oops. I knew something sounded wrong when I typed it :-). And I've opened two of them!

Gin1984

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What to do with your savings depends on what your goals are. Do you want to buy a house after you graduate? If so, then you might want to keep the money somewhere safe-ish (http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/). If you have no immediate plans to do that, then sure, go ahead and open a taxable brokerage account.

When I was in grad school, I knew I wanted to buy a house after graduation, so I put my money in a CD, using BankRate to find the highest national interest rate.

Another option is if you plan to have children, you can open a 527 plan in your own name and then later transfer it to a future kid.

(FWIW, I consider premature house-buying to be a huge mistake, so don't even think about it unless you already know you love a particular city and want to live there forever.)
529 plan, not 527.

Oops. I knew something sounded wrong when I typed it :-). And I've opened two of them!
LOL, there are too many bloody numbers involved.  :P

DSA

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Great news! I got in touch with someone at my university's HR, and it turns out I do have access to the 457b and 403b plans! I am able to log into the Fidelity NetBenefits site and it looks like I'll enroll for the 457b plan.

I've heard that I should contribute at enough pre-tax to lower myself down to the 10% tax bracket. My question is: if this is the case, what are some tools/calculators I can use to figure out how much that should be?

Gin1984

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Is it just you?  No spouse/dependents?  Then it is easy.  Add the 2014 standard deduction, plus your personal exemption, plus the top of the 10% bracket (it is around $8500 I think for singles) if you google it is easy to find.