Renaissance Man wrote:I didn't know that a stipend didn't count as income, even for a PhD?
Apparently, it is "income" and you have to pay tax on it, but it is not "earned income."
It depends. If the school reports it on a W-2, it's earned income that can be contributed to an (Roth) IRA. If it's under box 6 of 1099-T form, it's a taxable "award" and can not be used to fund an (Roth) IRA (super lame...I just got blind sided by this quirky tax rule).
Anyways, I'm normally all for funding Roth IRAs while your income is very low, but student loan rates are 7~8% and there are no more subsidized loans, meaning they start incurring interest right away.
If I'm doing my math right, you'll squeak out a small benefit from the Roth between the future tax benefits (assuming 33% marginal, pre-tax ~$7500 --> $5000) vs interest for 4 years (assuming 8% at 33% marginal, $400/yr --> after tax deduction $268/yr), but you've taken on the risk of the market. (someone double check my math) You're basically going into debt to invest.
Great idea, but if it were my life I wouldn't put my self in more debt (another monthly bill, dealing with annoying companies calling you, the risk of not being able to pay them back, and having added pressure to pick a high paying specialty because I have more loans to pay) to fund a Roth. The math is slightly in your favor to fund the Roth, I personally believe the freedom of being debt free is more important. Either choice is a fine.
BTW, congrats on thinking of this stuff now. You're ahead of vast majority of your peers and I'm sure you'll end up fine.