Can you use a graduate stipend to contribute to a 403b?

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qwertyjazz
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Can you use a graduate stipend to contribute to a 403b?

Post by qwertyjazz » Thu Aug 29, 2019 3:13 pm

I am not sure how to find the correct IRS publication section or how to answer this. If you get a graduate stipend and HR allows it, can you use that funds to contribute to a 403b? I am not sure if it counts as income for 403b purposes

Thank you

Edited additions
Social security is not withheld. No W2. But for some reason HR is letting me contribute to a 403b
Last edited by qwertyjazz on Thu Aug 29, 2019 3:32 pm, edited 1 time in total.
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aristotelian
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Re: Can you use a graduate stipend to contribute to a 403b?

Post by aristotelian » Thu Aug 29, 2019 3:15 pm

No, does not count as earned income for Roth/Traditional IRA either.

student
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Re: Can you use a graduate stipend to contribute to a 403b?

Post by student » Thu Aug 29, 2019 3:19 pm

It depends. Is the stipend free money as in scholarship or is it teaching assistantship in which you have to work? See https://www.insidehighered.com/blogs/gr ... t-roth-ira
Last edited by student on Thu Aug 29, 2019 3:24 pm, edited 1 time in total.

HomeStretch
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Re: Can you use a graduate stipend to contribute to a 403b?

Post by HomeStretch » Thu Aug 29, 2019 3:21 pm

Ask HR. If HR withholds payroll taxes on the stipend, it’s earned income.

Dontridetheindexdown
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Re: Can you use a graduate stipend to contribute to a 403b?

Post by Dontridetheindexdown » Thu Aug 29, 2019 3:24 pm

If it is subject to tax and to social security, yes, you can defer taxes and contribute to a TAX DEFERRED retirement plan, 403(b), IRA, or you can PAY THE TAX and contribute to a ROTH IRA.

ROTH might be the best investment if you are in a very low federal tax bracket.

If it is not subject to tax and social security, you have the best deal going - it is cash in your pocket, not subject to any withholding.

In my day, most of the graduate stipends were not subject to tax and to social security.

This was a way to save money for the educational institution, because they did not have to pay their half of the social security, and they did not have to pay into state unemployment funds, etc.

I knew a few grad students who were approaching 30 years old and had never yet contributed to social security.

That was 40 years ago.

Topic Author
qwertyjazz
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Joined: Tue Feb 23, 2016 4:24 am

Re: Can you use a graduate stipend to contribute to a 403b?

Post by qwertyjazz » Thu Aug 29, 2019 3:28 pm

Dontridetheindexdown wrote:
Thu Aug 29, 2019 3:24 pm
If it is subject to tax and to social security, yes, you can defer taxes and contribute to a TAX DEFERRED retirement plan, 403(b), IRA, or you can PAY THE TAX and contribute to a ROTH IRA.

ROTH might be the best investment if you are in a very low federal tax bracket.

If it is not subject to tax and social security, you have the best deal going - it is cash in your pocket, not subject to any withholding.

In my day, most of the graduate stipends were not subject to tax and to social security.

This was a way to save money for the educational institution, because they did not have to pay their half of the social security, and they did not have to pay into state unemployment funds, etc.

I knew a few grad students who were approaching 30 years old and had never yet contributed to social security.

That was 40 years ago.
It is not subject to social security but it is to federal tax. Unfortunately, I file joint with my spouse and combined income is not that low.
G.E. Box "All models are wrong, but some are useful."

Topic Author
qwertyjazz
Posts: 1134
Joined: Tue Feb 23, 2016 4:24 am

Re: Can you use a graduate stipend to contribute to a 403b?

Post by qwertyjazz » Thu Aug 29, 2019 3:30 pm

So HR might be allowing me to do this incorrectly? Social security is not with held. It is a classic graduate stipend, but HR for some reason is letting me contribute to a 403b
G.E. Box "All models are wrong, but some are useful."

billfromct
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Re: Can you use a graduate stipend to contribute to a 403b?

Post by billfromct » Thu Aug 29, 2019 3:51 pm

It sounds like your University does not contribute to SS & Medicare because they have a pension plan & retirement health insurance. If this is the case, I believe the University is exempt from withholding SS & Medicare taxes or funding the employer share of SS & Medicare contributions.

You should check with HR about the SS & Medicare deductions.

If they are deducting Federal income taxes, it appears that you are a W-2 employee & have taxable earned income.

You don't mention if you are funding a Roth IRA. If you are are a W-2 employee with earned income, you should fund a Roth IRA.

My daughter is a graduate student, gets a taxable stipend & W-2 form at the end of the year. The University does not deduct SS or Medicare taxes. She contributes to a Roth IRA but does not contribute to the University Roth 403b plan due to lack of interest. Her loss, as that money would have 30-35 years to compound tax free & can be taken out state & Federal tax free after age 59.5.

bill

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