Hello beautiful people, today I am back in action with my faithful finances series. I am financially illiterate…and I’m trying to change that one step at a time. As a graduate student, making money is honestly one of the last things on my mind. I’m worried about my grades. I’m struggling through exams, competencies, and keeping my mental sanity intact. However, one day I will be a real adult…making real money!
I have multiple blog posts so far in this series including:
I’m back this summer, reading to tackle a few more green giants!
Before I start, the purpose of this series is to learn how to faithfully manage my finances. I don’t just want to be a good saver, spender, or investor. I want to be a good steward of the money God has given me.
So to do that, I need to pray, and I encourage you to pray! So, let’s pray together:
Prayer
Dear God,
Thank You for giving us plenty of knowledge and understanding through the internet and teachers and experts, but the truth is no one knows as much as You do and no one cares as much as You do. It’s intimidating to think about money, but I want to help others and myself stop living in fear of money when it’s a neutral tool. I pray for wisdom, discernment, and godly convictions. I pray that we would be able to use money in ways that honor You! Thank You for giving us the opportunity to ask You for guidance in our everyday lives.
In Jesus’ Name we pray,
Amen
Information will be sourced because I figured this out by compiling information I found online. I think it’s pretty overwhelming to start, and I wanted to make this blog as an easily digestible way to understand Roth IRAs and retirement funds from the perspective of someone learning.
Please do your own research, I’m just a regular person sharing what I learned from others in an accessible format!
Read: Contributions to Individual Retirement Arrangements (IRAs)
What is a Roth IRA?
Roth IRA Explained | A simple explanation of the Roth IRA.
IRA or Roth Individual Retirement Arrangement is basically an account from the government that you can put investments into.
Why would I want a Roth IRA?
I would want a Roth IRA because of tax-benefits. Basically if you have a Roth IRA you can do investments tax-free! Any investments: stocks, bonds, housing, etc.
Who can have a Roth IRA?
Info sourced from: Everything You Need to Know about Roth IRAs in Graduate School
“Anyone with taxable compensation (or a spouse with taxable compensation) can contribute to an IRA; it is not a benefit offered by your workplace like a 401(k) or 403(b). The contribution limit to an IRA in 2021 is $6,000 ($7,000 for people aged 50 and older) or your amount of taxable compensation, whichever is lower.”
That sounds great: What’s the drawback?
By using this account to protect your investments from taxes, you are now limiting when you can take this money out and for what reasons you’ll be taking the money out for.
Why not just have a regular investment account that gets taxed?
Because then you…save on taxes! Simply put. You can have your investment grow without constantly being taxed. It’s like a plant with those copper wiring nets over it so birds can’t peck on it (my best analogy).
Pause: Roth IRA is a long term investment strategy.
Roth IRA’s are not going to be a quick, easy way to make money. It takes time to grow. You probably shouldn’t touch it until you’re at the retirement age. I think it’s hard to think about that since I’m only in my 20s and making negative dollars, but it’s important to make these considerations now!
So, the question I had relevant to my life is “Can graduate students have Roth IRAs?” cause I’m not making much money at the moment (or a sizable amount give or take a few work-study sessions).
The short answer: Yes!
The longer answer: Fellow graduate students, we can start Roth IRAs now!
This is important to start thinking about savings because we’re usually in our 20s-30s around this time, and we have time on our side. Yes! Being a graduate student is an advantage (despite how you and I might feel sometimes).
Since most people wait until their 40s-50s to start saving, if you start saving now then you can make the same amount in your ROTH IRA in less time just because of compounding interest over time. Super cool!
What is income that can be used for the Roth IRA as a graduate student?
Information sourced from: Can a Grad Student Contribute to an IRA Using His Stipend?
In the video linked, you can see that depending on if your pay is compensatory or non-compensatory (which determines which tax report you’ll receive) that will be able to contribute to an IRA.
PAUSE: Make sure you keep your W-2s if you do get compensation! So important. Save a copy somewhere safe!
If you lost yours, check out: What To Do If You Lost Your W-2 | GOBankingRates
An example from the article goes:
Closing…for now!
Okay! So, that’s a really basic introduction to IRAs! I want to expand this series actually by talking about the actual steps, helpful tips, and REAL behind the scenes of an average-joe graduate student like myself going through the steps of opening a Roth IRA and HOPEFULLY getting to make a contribution to 60 year old Grace.
Stay tuned by following me on instagram: @youlovedfirstblog or subscribing to my blog posts and getting emailed!
Bonus Homework: Figure out if you have taxable income that is eligible for contributions to a Roth IRA! That’s it. Is it even possible for you to start a Roth IRA? Figure it out! Using Google, Youtube, and reading books. Ask financial advisors. Go for it!
Ending Prayer
Dear God,
Thank You for giving me the patience and wisdom to be able to learn and share these details with others. Lord, I am really poor in financial literacy and currently just poor in finances, but You are rich in wisdom, understanding, and You made everything! You lack nothing. So teach me how to learn. I want to understand from Your perspective. I don’t want to just get rich or make money or just save for retirement. I want to glorify You through this the best I can. Please help me to also help others who are in similar boats to me. Lord, it’s scary to think about money because it’s overwhelming, but I pray for Your help and guidance.
Thank You so much,
In Jesus’ name I pray,
Amen
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