prospective grad student

The Graduate Student Savings Act Fixes a Major Flaw in Tax-Advantaged Retirement Accounts

October 14, 2019 by Meryem Ok

In this episode, Emily interviews Abigail Dove, a PhD student at Johns Hopkins. Abby spent last summer as a science policy fellow at the Federation of American Societies for Experimental Biology (FASEB). Her major policy accomplishment during her internship was to secure FASEB’s endorsement of the Graduate Student Savings Act of 2019 (GSSA), a bill that has been proposed in both chambers of Congress. Graduate students and postdocs are not currently permitted to contribute their non-W-2 income, which typically comes from fellowships and training grants, to Individual Retirement Arrangements (IRAs). The GSSA would allow this type of income to be contributed and have a very beneficial effect on the PhD trainee workforce. Abby explains her role in shepherding the GSSA endorsement through FASEB, what the GSSA would do for graduate students and postdocs, and how the GSSA relates to the SECURE Act, another bill that has passed the House and is before the Senate.

Links Mentioned in the Episode

Teaser

00:00 Abigail: But it was a little tricky for FASEB to first navigate the waters. They’ve never supported a tax legislation before. You think that experimental biology doesn’t have that much to do with legislation on tax. But here was a perfect one for them to start.

Introduction

00:22 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season four, episode nine and today my guest is Abigail Dove, a PhD student at Johns Hopkins and recent science policy fellow at FASEB, the Federation of American Societies for Experimental Biology. Abby’s major policy accomplishment during her summer at FASEB was to secure FASEB’s endorsement of the Graduate Student Savings Act of 2019, or GSSA, a bill that has been proposed in both chambers of Congress. Graduate students and postdocs are not currently permitted to contribute their non-W2 income, which typically comes from fellowships and training grants to individual retirement arrangements or IRAs. The GSSA would fix that problem and have a very beneficial effect on the PhD trainee workforce. Abby explains her role in shepherding the GSSA endorsement through FASEB, what the GSSA would do for graduate students and post docs, and how the GSSA relates to the Secure Act, another bill that as of this recording has passed the House and is before the Senate. Without further ado, here’s my interview with Abigail Dove.

Will You Please Introduce Yourself Further?

01:33 Emily: I have joining me on the podcast today, Abigail Dove, and she is a PhD student who completed an internship at FASEB last summer. And she has a lot to tell us about the Graduate Student Savings Act. So if you have been wondering about your IRA and why you can or cannot contribute to it, that’s what we’re going to be discussing in today’s episode. Abby, thank you so much for joining me today and will you please introduce yourself a little bit further?

01:59 Abigail: Sure. Thanks for having me. My name is Abigail Dove. Currently, I’m a PhD student at Johns Hopkins and I just started my sixth year. I work in fruit flies and study the gonad development. A little bit of my background: I first started as an undergraduate at Bard college, a small liberal arts school in upstate New York. And then I did a postbac for two years at the NIH NIDDK (National Institute of Diabetes and Digestive and Kidney Diseases) before starting at Hopkins. What we’re talking about is kind of the work that I did at my internship at FASEB, which is the Federation of American Societies for Experimental Biology, which I guess to be a little more descriptive it’s a society that represents 29 member societies, which has about 150,000 scientists that they represent.

Tell Us More About Your FASEB Internship

02:57 Emily: Excellent. You and I have common that we both did a postbac at the NIH. In fact, I’ve interviewed several other people on the podcast who have that on their resumes as well. So very popular program. Anyone still in college considering going for a PhD in biomedical sciences or related areas should definitely consider the NIH postbac program. It’s amazing. Okay. So you had this internship at FASEB last summer. What exactly were you doing in that role? Because it’s a little bit unusual for a graduate student to have an internship. And I think especially a graduate student in the biological sciences because, I don’t know about you, but I sort of observe the culture as like, “ah, you need to stay at the bench 120% of your time and never do anything away from the bench.” So please tell us a little bit more about what you were doing in that internship.

03:40 Abigail: Yeah, so I was really fortunate. I have a PI that–we both know that I’m interested in a career that is outside of the academic track. So, I did a lot of science outreach and I knew that I like communicating science to the public. So I wanted to pursue this career of science policy as a way to talk to the public about science and its importance. So what I did at FASEB, I had a lot of responsibilities. I was particularly interested in training and workforce policy. So, policy that relates to students, postdocs, and even faculty as it’s something that everyone can relate to. So that was one of the reasons that I was most interested in it. And I did a wide range of things. I hosted a webinar on work-life balance and the lab culture and we can include a link to that if anyone wants to watch it later. I represented FASEB on Capitol Hill and at the NIH for different events and I generated comments on sexual harassment that will soon be sent to the NIH. I also helped organize an online symposium series for the FASEB Science Policy Committee on challenges facing women throughout their career lifetime. And then I compiled minutes for the meetings, I drafted talking points for committee members, and then the big thing that I did was I spearheaded FASEB’s endorsement of the Graduate Student Savings Act.

How to Land a Science Policy Internship

05:13 Emily: Excellent. And we’ll get a lot more into that in a moment. But that sounds like a really exciting internship. It’s absolutely fabulous that your PI was supportive in you completing that. I actually did a science policy internship as well. The Mirzayan Policy Fellowship out of the national academies. That was actually after I finished graduate school. But it’s available to current graduate students as well. So, if what Abby was describing sounds amazing to you, that’s another potential avenue for you to get that kind of experience in science policy. Okay. So how did you actually land this internship if other people are interested in doing something similar?

05:46 Abigail: Yeah, so I first started–we have an office at Hopkins, it’s called the Biomedical Careers Initiative Office. And it’s really great for people that are looking for careers outside of the academic track. They were offering a course on science policy and advocacy that was actually being taught by the Director of Public Affairs at FASEB, Jennifer Zeitzer, and the Director of Science Policy, Dr. Yvette Seger. So the class gave us a background on legislation and how bills get enacted into law. And we did some case studies on different issues in science policy. They also taught us how to be a science advocate. But finally, we had to write a policy memo on an opportunity or challenge in research activities supported by federal funding, and we had to give an elevator pitch on that to the class as well. And I did mine on saving for retirement as a graduate student and a postdoc.

06:48 Emily: Yeah. Excellent. And so was it through that paper and that pitch that you gave that you found the Graduate Student Savings Act?

06:56 Abigail: Yes, that’s how I found it. Oh, I guess we didn’t cover how I got the position too. So this office that hosted the class actually also hosts internships for students. And so FASEB was also accepting applications for science policy fellows through the Biomedical Careers Initiative Office. So I applied for that directly. But they also have internships for a wide range of different careers outside of the academic track, including industry and consulting and patent law as well as policy.

What is the Graduate Student Savings Act?

07:33 Emily: It sounds like a great deal of support actually, that Hopkins is providing and helping you sort of step a little bit outside of academia into another role that can really presumably help your post-PhD career, should you decide to pursue one in science policy. So let’s kind of back up a second and explain more about what the Graduate Student Savings Act is because it’s probably not one that most people have ever heard of. Right? Like probably a lot of people in my audience, they know about IRAs. Maybe they don’t have one, but they sort of know they’re supposed to or maybe they know they might not be able to have one. So what is the Graduate Student Savings Act?

08:06 Abigail: Yeah, so the Graduate Student Savings Act. There’s a bill in both the House and the Senate and they’re essentially the exact same bill, so they’re called companion bills. And they would allow graduate students and postdocs who receive their income through either a fellowship or stipend to contribute to an IRA or an individual retirement account. The current issue right now is that on the current tax law, trainees who are receiving their income through a fellowship or a stipend are actually prohibited from contributing to an IRA because it’s not considered compensation or earned income.

08:44 Emily: Exactly. And I like to further kind of clarify this for people by saying within academia we might use the word fellowship in different ways. We might use the word stipend in different ways. Nobody’s ever heard the word compensation. But what it really boils down to is, is your graduate student or postdoc income reported on a W2 or not reported on a W2? It could be reported somewhere else, it could be reported not at all. W2 income is the kind of income, taxable compensation, or earned income that can be contributed to an IRA under the current law. And anything else in terms of graduate student, postdoc income non-W2 does not fall into that category, unfortunately. So that’s how things currently stand. The Graduate Student Savings Act includes this type of non-W2 or fellowship income in taxable compensation for the purposes of contributing to an IRA. Is that correct?

09:39 Abigail: Yes. And unfortunately, it doesn’t change its designation universally. It doesn’t make it earned income or compensation, but it just allows it to be saved for retirement purposes in an IRA.

09:51 Emily: Yeah. This is one of those confusing things about the tax code in general is that they use these terms like “taxable compensation” and “earned income” under different contexts. And so sometimes they have different definitions under different contexts. So earned income has other implications in the tax code, like around the earned income tax credit. Whereas, taxable compensation has a different meaning. It’s under the section for IRA contributions and so forth. So it’s sort of defined there as “taxable compensation for the purposes of contributing to an IRA is these things,” and currently, it says explicitly, “does not include fellowship income, not reported on a W2.” So that’s the current status. But then there’s this Graduate Student Savings Act bill as you said, it’s sort of on the floor in both the House and the Senate.

How Abby Got FASEB to Endorse the GSSA

10:37 Emily: I was looking at the history of this and I think the first time it was introduced was 2016 and it’s introduced every year I think in more or less the same form until now, 2019. We should actually say we’re recording this interview on September 25th, 2019. It will be released within a couple of weeks of that date. So things might have changed. But as of September 25th, 2019, the Graduate Student Savings Act has not been passed but it is, I guess, available to be passed. So, what was the process like for getting FASEB to ultimately endorse the Graduate Student Savings Act, and what work did you do to make that happen?

11:15 Abigail: Yeah, so originally before I even did the class, FASEB was not aware of the Graduate Student Savings Act at all. It wasn’t on their radar. It wasn’t until I wrote my policy memo on the issues of graduate students saving for retirement, and I actually did the research and I was just Googling it and I came across it on my own, that we both kind of became aware of it. And so I kind of took this on as a task that I wanted to complete in my fellowship and I thought it was an important task and FASEB was great. If there was an issue that I really wanted to take on and it was something that was good for FASEB to endorse, they would have no problem with me taking the lead. So this was my big accomplishment of the fellowship.

12:04 Abigail: And since FASEB is a nonprofit organization any bill that they support needs to have bipartisan support for endorsement. And that thankfully both the House and Senate bill had bipartisan support on both pieces of legislation. I think some of the previous iterations of the Graduate Student Savings Act didn’t have bipartisan support. So this was really important for FASEB to get on board. But it was a little tricky for FASEB to first navigate the waters. They’ve never supported a tax legislation before. You think that experimental biology doesn’t have that much to do with legislation on tax. But here was a perfect one for them to start.

Personal Impact of Flawed Tax Legislation

12:49 Emily: Yeah. As you were saying earlier, it’s a clear workforce issue. Right? So that’s the definite connection or conduit between what they do generally and this weird little tax quirk that happens to deeply affect their own workforce.

13:03 Abigail: Well, yes. So this actually personally affected me. From when I was in college and doing other side jobs, I was always contributing to an IRA, if possible. My dad is very financially responsible and he just told me when I was young, “you need to have an IRA.” He always recommended a Roth IRA. He always thought it would be better to get tax first and any profit you make later you don’t get taxed on. So there’s two different IRAs, a Roth and the standard IRA. So maybe some clarity on that. But this personally affected me when I was a post-bac for those two years I was receiving stipend income and wasn’t reported on a W2 so I couldn’t contribute to an IRA for those two years.

13:51 Abigail: Then my first year in graduate school I was on a training grant, so also not receiving a W2 so I couldn’t contribute. My second year I was actually a teaching assistant, so I was being employed by the university somewhat and getting my income reported on the W2. So I was for that year able to contribute, which was really great. And then I got awarded the National Science Foundation, Graduate Research Fellowship award.

14:20 Emily: Congratulations, but also, dun, dun, dun.

14:23 Abigail: Yeah. So it was really great. But then I also couldn’t contribute to my IRA because it wasn’t reported on a W2. So that affected me for my third and fourth year of graduate school. My fifth year I got married. So that changed things a little. I was still on my NSF fellowship. But because I was married to someone who had a real job and was receiving income that was deemed compensation, I was able to contribute to my Roth IRA just because I was married to my husband. so that was my last year of my fellowship. Now I’m back at Hopkins and I’m TA’ing for this year. So I will again be able to contribute even if my husband wasn’t receiving earned income himself.

15:14 Emily: Yeah, I have a little bit of a similar story of flip-flopping between RAs and fellowship income. And at some point I got married and so my husband, having a similar situation of flip-flopping between RAs and fellowship income, it helped in certain years one of us would have a taxable compensation, maybe the other one wouldn’t. So one of the things that helps people in this situation–under the current status of fellowship income, non-W2 income is not eligible to be contributed to an IRA–one thing that helps is that the academic year and the calendar year do not line up. So, if you have different sources of funding in two different academic years, maybe you can be covered for one calendar year in terms of being able to contribute. It helps if you’re married of course, to someone with taxable compensation. And the other workaround is actually having a side hustle that is self employment income. So self-employment income is taxable compensation that can be contributed to an IRA. So that’s something I sometimes float with people who are frustrated by their multi-year wonderful fellowship packages that don’t allow them to contribute to an IRA. If it’s possible to side hustle, that’s another way to kind of sneak in that eligibility. So, your stipend wouldn’t be eligible, but that side hustle income would be eligible. All these are workaround solutions, the real main solution is just changing the tax code because this is ridiculous that this is happening, right?

Commercial

16:35 Emily: Emily here for a brief interlude. Through my business, I provide seminars and webinars on personal finance for graduate students, postdocs, and other early-career PhDs for universities, institutes, conferences, associations, etc. I offer seminars that cover a wide range of personal finance topics and others that take a deep dive into the financial topics that matter most to PhDs, like taxes, investing, career transitions, and frugality. If you are interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. That’s p f f o r p h d s.com/speaking. Now back to the interview.

Anything Else About Your Role in FASEB?

17:25 Emily: Okay. So, anything else to add about your role with getting FASEB to endorse the GSSA?

17:31 Abigail: Yeah. So, because it was a tax bill and FASEB had never endorsed a tax bill before, they want it to go through full process of endorsement. They wanted to get everyone’s feedback on it. So the first step was going through their Training and Career Opportunities Subcommittee. So, they have a monthly meeting, I prepared talking points for the chair of that committee, and we discussed it and they couldn’t see anything wrong with it. So, we got a full endorsement from that subcommittee. Then we had to go up one level to the Science Policy Committee and did the same thing, had to talk to the entire committee, got overwhelming support of it. So, it got pushed up to the next FASEB tier, which was the executive committee. They gave the final approval. Actually, for the Training and Career Opportunities Subcommittee and the Science Policy Committee, I made a one-page summary of the current situation and how the Graduate Student Savings Act would change that. So, a one-page review for them. And then when we went for approval for the Executive Committee, we had the full letter drafted for them to approve, and we can also give you a link to the FASEB’s endorsement letter too, as well.

18:56 Abigail: Normally, it would go to the FASEB board for approval, but the board was jam-packed with what they had to do for that month. So, because we got unanimous support from the two committees before that, they thought that the Executive Committee approval would be sufficient. But I started my internship in June and it wasn’t approved until the first week of September. So, it does take a long time for this approval to go through because you have to wait every month for the next committee to happen. And if there are changes and edits to it, then it can also take a lot of time. You want to do it as quick as possible so the endorsement actually has an effect if the bill is getting voted on soon.

19:47 Emily: Yeah, exactly. This is fascinating to hear kind of how the sausage is made, and not even to make the policy, but just to get something like this: an endorsement from group whose endorsement matters in this kind of thing. What I’m just thinking is how good it is that FASEB has connections to the current trainee workforce like through you and other interns they accept because they had you to tell them, “Hey, this is an issue that’s going on. And by the way, there’s a solution to it and it’s in front of Congress right now.” So it’s just, I guess it’s really good for them to offer these kinds of internships programs to get those fresh ideas and those connections to people who are still in training.

20:30 Abigail: Yeah, I think they really appreciate the fellowship program for that same perspective. The younger generation. People serving on these committees and the boards are faculty members that have been serving for a while and they’re very removed from this training portion. I think there might be–and correct me if I’m wrong–but I think there could be a few postdocs who are serving on boards, but I think that’s very unlikely. Most of it’s always faculty. There’s never a postbac representative in these meetings. So, having a fellow there, they really value so they can get that younger perspective on what’s happening currently.

What is the SECURE Act?

21:10 Emily: Yeah. That’s excellent. Okay. So that was your role with FASEB and then with respect to the GSSA, the Graduate Student Savings Act. There is a different bill before Congress that has sucked up a lot more attention in terms of changing the tax code than the GSSA has, and that is the SECURE Act. Can you tell us what the SECURE Act is? Not in a lot of detail, but basically just how it relates to the Graduate Students Savings Act?

21:35 Abigail: The SECURE Act is Setting Every Community Up for Retirement Enhancement Act of 2019, and it’s just a massive retirement savings bill. For some perspective, the Graduate Student Savings Act is a two-page bill, whereas the Secure Act is 124 pages. So it’s just way too large for FASEB to endorse something so big. But fortunately, it has almost the exact same wording as the Graduate Student Savings Act in one of its sections. So it would get across the same thing as the Graduate Student Savings Act. It would allow graduate students receiving unearned income to contribute to an IRA account. It just was too big of a bill for FASEB to endorse because we can’t vet everything and it’s a little bit out of FASEB’s wheelhouse.

22:22 Emily: Yeah. So, basically what sounds like has happened is that the Secure Act has absorbed the Graduate Student Savings Act pretty much verbatim. And it’s making a lot of other changes as you said to retirement accounts. I’ll link to a couple articles on the Secure Act from the show notes, but some other things that caught my eye that it’s trying to address are like having part time workers have more access to 401k’s. It’s changing a little bit of the distribution rules, like once you’re actually in retirement and about inherited IRAs and there’s just a lot of changes there. Abby and I were glancing over it and we saw something that, “Oh maybe this addresses the kiddie tax.” We’re not even sure about that, which would be amazing if it does. So there’s a lot of different things that it touches.

23:02 Emily: And as you were saying earlier, like for FASEB being able to endorse the GSSA, the GSSA had to have bipartisan support. In fact the Secure Act does have bipartisan support. It passed the House and is currently hung up in the Senate as of, again, September 25th. Because the Secure Act passed the House with such strong bipartisan support, everyone kind of thought that it would pass the Senate really quickly. But it’s been hung up, so its future is uncertain but hopefully it will get through. And the wording that was adopted from the GSSA, hopefully that would actually be maintained. And in the final version we would actually see this benefit be extended to graduate students and postdocs where it wasn’t before. But that’s kind of where things stand as of today as of this recording. Hey, maybe by the time this is published something will have changed on that front. That would be awesome.

23:56 Abigail: I think something also important to note is that the wording of the bill, I don’t think that it would also apply to postbacs. It seems very specifically to graduate students and postdocs. So I think, unfortunately, postbacs would be still excluded from the Graduate Student Savings Act.

How Will the Internship Help Your Future?

24:12 Emily: Hmm. Interesting. Yeah. I’ll have to take a look at that because I didn’t realize there were distinctions being made among different levels of training. We’ll see how that actually shakes out. It’s always sort of uncertain until kind of the next tax cycle rolls around how these things are actually going to be implemented and everything. Thank you for pointing that out. For postbacs out there, this might not be the news you’re looking for. Maybe you still need the side hustle or maybe you still need to get married to have one of these workarounds. Just kidding, people don’t do that. Okay. So Abby, how do you think that this internship experience with FASEB is going to benefit your future career?

24:52 Abigail: Oh, I think it benefited me already tremendously. Besides from just getting a sense of what science policy really is and getting to immerse myself in it and what I would expect in a job. I got great networking. I already met a bunch of people because FASEB represents so many other societies. You know, I really got to get my name around and people know my work now. I also just got a ton of experience. I generated a bunch of writing samples, which is really crucial in the science policy job search, and I think I’ll get great references also for future jobs. So, it’s benefited me tremendously.

25:30 Emily: Do you have specific plans yet for after you finish? Like what positions you might apply for?

25:35 Abigail: Yes, I’m probably looking for science policy analyst positions. When I graduate. I don’t see really any benefit of doing a postdoc afterwards. There are people that continue to do more science policy fellowships. I’m kind of in the boat where I would just like to be out of fellowships and schooling and just want a real job. And I think with this internship I generated enough experience that I would be able to get an entry-level position and be a sought-after candidate.

Final Advice for Early-Career Grad Students

26:08 Emily: Yeah, I have a great deal of sympathy with that position of, “okay, I don’t need any more training. I’m trained. Let me have a job. Finally.” Definitely. So Abby, last question here, which is one I ask all of my guests. What is your best financial advice for another early-career PhD? And that could be related to something we’ve talked about today or it could be something entirely different.

26:29 Abigail: Yeah. So I think of course I would recommend that everyone should open and save in a Roth IRA account and start saving what they can, even if they can’t hit the max. But I think more importantly, we know that graduate school is a really stressful time, and I think it’s really important to invest in your personal wellbeing. And so if that means, paying for workout classes or traveling or if it’s even retail therapy. I think whatever it is, if it’s important to you and if it makes grad school a little bit saner for you it’s important to put some money aside and make time for yourself.

27:08 Emily: Yeah, it’s, it’s actually a little bit weird that sometimes we have to give graduate students permission to spend money on themselves. But if you think about it like more broadly, other people when they receive the financial advice to cut back on those discretionary expenses, cut back on those Wants and so forth, it’s usually because they’re spending at such a level that’s actually endangering their other financial security.

27:35 Emily: Graduate students I would say in general are not spending a sufficient percentage of their income on discretionary things for themselves. Actually, sort of to tie this back to the GSSA, one of the co-sponsors of the GSSA is Senator Elizabeth Warren. She’s sponsored every year in the past, whatever, four years that it’s been up. Many years ago, back when she was a consumer advocate, basically, she wrote this book called All Your Worth*. She co-authored it with her daughter. And that book promotes the balanced money formula, which is to spend, of your after-tax income, no more than 50% of your after-tax income on Needs, 30% on Wants and 20% to Savings. And I was looking at that the other day and I’m thinking that graduate students, I would be surprised if they spent 30% of their income on their Wants.

[* This is an affiliate link. Thank you for supporting PF for PhDs!]

28:28 Emily: Usually, it’s that Needs category that gets up to 60, 70, 80% or more because of rents and high costs of living areas and low stipends and all of those kinds of problems. So yeah, in fact, sometimes we do need to hear the advice that it is okay to spend a little bit of money on yourself to help bolster your mental health and help you get through graduate school in great shape. Of course, it’s ideal if you can do that alongside saving for your future and doing all these other great things, but we want you to get through graduate school in one piece. So yeah, thank you for that advice, Abby, and for giving this interview today.

29:02 Abigail: Well, thank you for having me.

Outtro

29:05 Emily: Listeners, thank you so much for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes, a form to volunteer to be interviewed, and a way to join the mailing list. I’d love for you to check it out and get more involved. If you want to support the show and my business, please go to pfforphds.com/helpout. There are plenty of ways to do so without laying out any of your own money. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it doesn’t hurt. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC.

How to Find and Apply for Fellowships (with ProFellow Founder Dr. Vicki Johnson)

September 2, 2019 by Meryem Ok

In this episode, Emily interviews fellowship expert Dr. Vicki Johnson, the founder and director of ProFellow. After completing multiple professional fellowships and her PhD, Vicki decided to help other fellowship seekers do the same by creating the ProFellow database, which now contains more than 1,200 professional and academic fellowships. Vicki relays the best way to find and apply for fellowships and gives excellent advice for making your fellowship application stand out. Winning a fellowship is the best way to increase your stipend or salary as a graduate student or postdoc, and Vicki shares from her experience some of the other career benefits that fellowships bring.

Links Mentioned in the Episode

Teaser

00:00 Vicki: At the end of the day, these organizations that are outside of the university are funding fellowships as a way to further their social impact mission. So make sure you understand what is the mission of the fellowship organization, why are they funding your research or would want to. Make sure you tie your story to their mission, how you’re going to further their mission. That will make you a more competitive candidate.

Introduction

00:25 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season four, episode three and today my guest is Dr. Vicki Johnson, the founder and director of ProFellow, the leading online resource for academic and professional fellowships. Vicki herself did four professional fellowships in addition to her funded PhD. Vicki and I discussed the best way to find and apply for academic fellowships, and Vicki gives excellent advice on how to boost your applications’ chances of success. Without further ado, here’s my interview with Dr. Vicki Johnson.

Will You Please Introduce Yourself Further?

01:06 Emily: Welcome to the podcast. Today, I am joined by Dr. Vicki Johnson, who’s the founder and director of ProFellow, which is a fantastic fellowships database and just amazing resource for graduate students and postdocs and anyone pursuing fellowships kind of in any way. Vicki and I are going to be talking today about everything fellowships. How do you find them? How do you apply for them? How do you win them? Because she is really the premier expert on this topic in our space. So Vicki, thank you so much for joining us today.

01:41 Vicki: Thank you for having me!

01:42 Emily: Can you tell us just a couple words about your background? You know, you have a PhD and how you got started with ProFellow.

01:50 Vicki: Sure. I actually started out in the fellowship world as a professional. I did four professional fellowships in the field of policy and I did some in the U.S. and some abroad. As I was progressing through my career, I did my Masters and then ultimately did my PhD, which was actually just a serendipitous thing that I did while I was on a professional fellowship. Then I had a major career transition about five years ago and decided to teach other people about how to find and win fellowships through ProFellow. And now I’m fully focused on that as my thing. I love fellowships, and I’m excited to tell people more about them.

How Do You Define “Fellowship”?

02:27 Emily: Yeah, it sounds like you have a ton of personal experience as well as your extensive professional experience. So yeah, let’s get started with that– with a pretty basic definition. What is a fellowship? Because that term can mean a lot of different things depending on who you’re talking to. So how do you define it?

02:45 Vicki: So for the purpose of our website, we sort of decided that the definition would be “short-term funded opportunities to do something exceptional.” So there’s a lot of funding opportunities, professional development opportunities, graduate school funding opportunities that aren’t necessarily called fellowship and title, but they do provide funding. They are time-limited, so they’re usually anywhere from a couple of weeks to a couple of years in length. And they provide you the resources and the network that you typically wouldn’t get in either a job or even just the regular scholarship. So it’s a pretty broad definition. People typically have heard of postdoctoral fellowships or they’ve heard of scholarships and things. But it’s a really very broad definition. So there’s quite a few professionals fellowships and also a whole other world of academic fellowships.

03:36 Emily: Yeah. And so I think today we’re going to be focused mostly on those academic fellowships, the ones that will pay your stipend, maybe pay some tuition and fees, pay your salary if you’re at the postdoc level. But just so people are aware, your site covers much more than that. And in fact, I did a policy fellowship myself after I finished my PhD. It was the, the Mirzayan Fellowship in DC. And that’s something that I wrote about for your site because that fellowship is one among the many others that you cover. But we will be focusing today on those academic fellowships. But just for anyone who’s thinking about another fellowship opportunity, still go back to ProFellow because it’s going to be an amazing resources for you as well. So with these academic fellowships, how do you go about finding them? We’ve all heard probably of the standout one in each of our fields, whatever that is, but there are going to be a whole lot more, too. So how do we go about finding these fellowships?

How to Use ProFellow to Find Fellowships

04:26 Vicki: Well here I’m going to do a big plug for the site profellow.com because we have an enormous database of fellowships at both the professional and academic level. So if you sign up for free to use ProFellow, you can create an account and come in and search our huge database. And within it there are filters. So you can either select fellowships for doctoral study, graduate study, which would include masters programs and postdoctoral research in addition to professional, even summer fellowships for students. You can narrow it down that way and then you can also narrow them down by discipline, your citizenship, years of work experience. I would also say use certain keywords. So let’s say you’re working in conservation. You can use that as a keyword in the database. But for the most part, I tell people to keep their search filters quite broad because there are a lot of fellowships that are multidisciplinary in nature.

05:18 Vicki: So even if it’s not specifically a conservation fellowship, there could be a whole range of fellowships that you can do a conservation related research project, or dissertation research or whatever, with the fellowship because it might be a broader social sciences fellowship or STEM fellowship. So keep your search broad and take the time to look through. We purposely made the listings so that they’re really brief and easy to skim and you can bookmark opportunities. And then you can also from the listing go to the website to learn more. And honestly, I only say this because it’s true. We are a better place to look for fellowships than, say, on Google. If you Google these things, you’ll come up with all sorts of stuff that may or may not be relevant to what you’re looking for. And it’s very difficult to find fellowships on Google or even just through word of mouth. So, use the website. It’s free, and it’s a great way to also find out about new opportunities that are coming up every year.

How Do You Maintain the ProFellow Database?

06:12 Emily: Yeah, thank you so much for that. I’ve been referring to ProFellow for many years as a key database for all of this, and it’s exciting to hear what all you do. I’m actually wondering how you find all these fellowships. Are you well-known enough that these new programs just e-mail you when they have something new coming up, or how do you maintain this database?

06:31 Vicki: Oh, good question. Well, back in the day, nobody knew who we were. But now that we’ve been around since 2011, we have a brand name in the fellowship industry. And honestly, some of the larger categories of fellowships– like, let’s say you’re Googling journalism fellowships or mid-career fellowships or postdoctoral fellowships– ProFellow will rank some of our articles at the top of the list. There are other keywords that we’re still fighting for to get to the top of the list. But if you’re listening to this and you’ve heard of us, you’ll see that. And we’re also very active in the fellowship industry. I just came back from a conference in DC, the Impact Fellowships Summit. So, our name is growing. We’re still a bit skewed toward, U.S. Citizens, U.S. Students, or people coming to the U.S. in terms of what funding is out there. But we are also growing globally. So we are getting more and more fellowships for non-U.S. citizens, international students, or people from other countries going to non-U.S. countries. So, it’s growing. So, there are more and more things. The more you share us with your friends and your colleagues and your professors, the more well-known we will be and even more fellowships we will list.

Applying for Academic Fellowships

07:40 Emily: Yeah, wonderful. Okay, so we have a grad student or a postdoc or an aspiring one of those categories who wants to win a fellowship. What’s the application process like for these academic fellowships?

07:54 Vicki: Yes, well, if you have never applied to a fellowship before, you’ll see that actually it can be similar to applying to graduate school. Usually, there’s a personal statement, recommendation letters, short answers that you have to respond to. In many cases, for the academic or research-related fellowships, you might even have to put in a research proposal. That could be anything from a really brief research proposal to something that’s really long and intense. So, it’s different for every fellowship. I say, get started early. The first thing you should identify is: what do you need to include in the application? I think if you’re in graduate school, you’ll be used to this process of writing a personal statement and talking about your goals, what you want to achieve in your research, so that experience will help you as you pursue the fellowships.

08:42 Emily: So I liked that you drew parallels between the process of applying to graduate school and the process of applying for fellowships. In fact, sometimes even the timing of those things can come together. Right? Do you find that fall is a heavy fellowship season or is it kind of spread out around the year?

08:58 Vicki: Oh yeah, that’s a very good question. Yeah, typically it’s just like the graduate school process where it’s based on the academic year. So you do want to look for fellowships as early as possible. Deadlines tend to fall anywhere between October and January. That’s kind of a typical, what we call, fellowship season. And so if you’re looking for funding, it’s often not very easy to get a fellowship that’s going to fund your next semester right away or even in a few weeks or a few months. Usually, you’re looking a year out. So that’s why, let’s say you’re entering your coming year– your academic year. The fellowships that you apply to this fall typically will fund your following academic year. So yes, keep that in mind. It’s an important kind of timeline that people should be aware of when they’re looking for fellowships.

How to Get Ahead of Fellowship Deadlines

09:42 Emily: Yeah. This is definitely something you need to plan ahead for. Can you tell me a little bit more about, not necessarily the timeline about the fellowship applications cause presumably they just have a due date, but all the various components that could go into an application. Different kinds of essays, letters, just stuff that you need to be working on. Like what do you need work on well in advance of these deadlines?

10:03 Vicki: Well, I think it’s really important if you’re looking for funding for academic research, say your dissertation, to do field work and that sort of thing. A lot of times what the fellowship organizations want to know is they want to know that you’re going to be successful. So when they fund you, they want to know that your project can be successfully completed in the time period of the fellowship with the resources available with the funding available.

10:25 Vicki: So if you’re applying for, say, like a summer fellowship that is only three months in length. That’s not enough time to do your entire dissertation. You’re probably just doing one element of it. So make sure that your research proposal, if that’s part of your application, really reflects what the fellowship is offering and what can be accomplished in that. Because feasibility is very important. It doesn’t matter how great your ideas is; if it’s not feasible, it won’t make it to the next stage. And in the personal statement too, they want to see more about why you’re passionate about your research topic. What are your longterm goals? Often people forget to put in what their career goals are or what they’re going to do after the fellowship. That’s really important. Make sure to include those because at the end of the day, these organizations that are outside of the university are funding fellowships as a way to further their social impact mission. So make sure you understand what is the mission of the fellowship organization, why are they funding your research or would want to. Make sure you tie your story to their mission, how you’re going to further their mission. That will make you a more competitive candidate. So those are, I would say, the main things to include.

Commercial

11:29 Emily: Emily here for a brief interlude. Through my business, I provide seminars and webinars on personal finance for graduate students, postdocs, and other early career PhDs for universities, institutes and conferences, associations, et cetera. I offer seminars that cover a wide range of personal finance topics and others that take a deep dive into the financial topics that matter most to PhDs like taxes, investing, career transitions, and frugality. If you are interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking that’s p f f o r p h d s.com/speaking. Now back to the interview.

More Advice for Fellowship Applicants

12:18 Emily: Yeah, so it sounds like there are some of these elements, you know, essays that you can reuse much of for several different applications that you might have. But some things are definitely going to have to be tailored to the specific organization.

12:30 Vicki: Absolutely. My mantra is that the amount of effort that you put into your application directly correlates with your likelihood of success. So, I know people don’t want to hear that, “Aw, man, I have to put a lot of time into my application,” because on top of it you’re studying and you’re working, you’re doing other things. But it’s true that when you’re focusing on an application, start it as early as possible because then you can break out times on your calendar to be able to focus just on the application and also make sure to tie in your professors, your mentors. They’ve been doing this a long time. Many of them have won multiple fellowships, multiple grants and funding awards. Don’t do this in a little silo by yourself. Make sure you tell your advisors, your professors that you’re applying for the fellowships because they could have some great insights. They may even be connected to the fellowship in some way you might not be aware of. So, be sure to reach out for advice from those groups, too.

How to Stand Out as a Fellowship Applicant

13:29 Emily: Yeah, we’re definitely getting into some good advice here for fellowship applicants. These fellowships presumably get hundreds, thousands, tens of thousands of applications. What’s going to really make a candidate stand out and make a fellowship application look very, very strong?

13:48 Vicki: Yeah. The two main things, especially with the academic research, if you are applying to a fellowship that is being funded by a foundation, a nonprofit government agency, NGO, whatever that is, make sure that you understand the mission of the organization. I think I mentioned this already, but a lot of people sort of skip over this part. They are so wrapped up in explaining their research and why they want to do it that they don’t really tie why their research aligns with the mission of the organization. So it’s very, very, very important that you touch on that mission. They may not ask you how you feel about their mission. They may not ask you how it ties to their mission. But when you think about the other group, the other person–the investors, as I like to call it–they’re investing in you. Make sure you make a really clear reason as to why they should invest in you because they have a purpose for the fellowship and you have a purpose for your research and you’ve got to make sure they tie together.

14:47 Emily: Yeah. Excellent. Any other advice for making an outstanding fellowship application, but let’s say also just an outstanding fellowship applicant? What can you do in your life that will go on your CV or that people will be able to write about in your letters that will help you stand out?

Fellowships: More than Just the Fellowship

15:05 Vicki: You know, I think some people get a little bit intimidated by the fellowship process. Like you said, there’s hundreds, thousands of applications and it can be really disappointing to get a rejection letter from a fellowship that you worked really hard on the application on. But just keep in mind that the effort that you put in, your professors and your supervisors are watching as you do this. And so even if you’re rejected, I’m telling you, there’s something extra that you get. I don’t know what the right word is, that will help you as you go further in your career. So it’s not all for not if you don’t get into the fellowship. But also, if you do get into a fellowship, make sure to take advantage of the wider resources that the fellowship offers.

15:49 Vicki: There’s usually an alumni network. They’re connected to high-level organizations and leaders in your field, both in the U.S. And globally. Take full advantage of every opportunity that the fellowship provides beyond just the funding that they’re going to give you. Because we all know that when it comes to career tracks that, these days to get a job, you have to be in the know. You have to know somebody, you have to be an influencer, you have to have personal connections. And these are things that are very valuable that you can get out of the fellowship. But also, these personal connections that you make are also very valuable when you’re applying to fellowships, too. So as you’re applying, reach out to alumni, reach out to professors and mentors, get as much advice as you can. All of this, little bit incrementally, adds to your success long-term.

How Often Should I Apply for Fellowships?

16:37 Emily: Yeah, I’m really glad you brought up the other benefits of winning a fellowship aside from the funding itself. So I had a friend in graduate school who was a Hertz Fellow. I was blown away by the number of networking events and opportunities to meet potential employers that that fellowship provided. It was truly outstanding, and I don’t know that there are that many others that go to that degree. But certainly as you said, there are alumni networks that you can be connected to. Really, it is another way of networking. A very, very good, strong networking connection to have won a fellowship. One other thing I wanted to ask you about: another guest that I just had on who was a fellowship applicant said something along the lines of, “it’s sort of a numbers game.” You just need to apply to a lot of stuff and hopefully, here and there you’ll win something. But really, as you said, each fellowship application takes a good amount of time dedicated to it. Would you say that people should be applying to a few fellowships every year? Not necessarily like full, “it’s going to pay everything” fellowships, but just some kind of award that they could go up for.

17:42 Vicki: To be honest, I’m not really in the mind frame of the numbers game. I’ve heard people say that. I’ve heard multi-award winners say that. As as I said, I have won multiple fellowships, but for each of them I was sort of applying for them one at a time. When you’re applying to graduate school or looking for graduate funding, often you do have to apply for a few at a time in the hopes that you get one of them. But I don’t know necessarily that it’s a numbers game where you just throw out a million applications and hope that one sticks, because I do think that approach could also distract you a little bit from really putting in the focus that you need to create a strong application. I would say just make sure that you’re a good fit for the programs that you’re applying to.

18:23 Vicki: If it really is a stretch, is your research actually furthering the mission of the organization? If it’s really a stretch, it might not really be worth applying to. Whereas if you find two or three fellowships that you think you’d be a really good candidate for, go for all three, because it will be worthwhile. And I should also say people should look into summer fellowships too, which are just kind of brief summertime fellowships that are specifically for students. Some of them are professional in nature. Some of them are for academic research as well. But even those little summer fellowships give you those professional networks and experiences that you can’t get otherwise and they’re very, very good for your post-graduation career goals.

Final Advice for Fellowship Applicants: Be Yourself

19:06 Emily: Yeah. Thank you for your insight on that. I’m going to ask you a little more about ProFellow in a moment, but just before we get there, any final words of advice for fellowship applicants?

19:17 Vicki: Oh, just be yourself, too. I think people worry too much about telling the organization what they want to hear. And I do teach people about the social psychology of really understanding the mission and making sure that you link your work to that. But at the same time, to be your authentic self is really valuable. There are people reading these applications. They’re not robots. They’re people. So, tell your story, your authentic story, and really be yourself. And if you get thrown a hard question, answer it as honestly as you can. If it was meant to be, it will be.

Additional Resources at ProFellow

19:51 Emily: Okay. So tell us a little bit more about ProFellow. You’ve talked about the database a little bit already, but I know you have a lot more stuff going on aside from just, this is where we can search for fellowships.

20:00 Vicki: Sure. At profellow.com, we do have this huge database of funding opportunities that you can search. We also do articles featuring fellows and ask them about their fellowship experience and their application tips. So it’s a great place to hear what fellowship alumni say about how they made their application stand out, what they did to get above the hundreds of thousands of applicants. We also do listicles, we do articles. Specifically, “10 fellowships in policy,” “25 dissertation fellowships.” So we have a lot of resources that help you find the fellowships and get the tips. We also have workshops, usually on a monthly basis, on everything from creating a great personal statement to creating an exceptional research proposal.

20:45 Vicki: So if you’re on our mailing list, you’ll be alerted to those things as well. And actually, next week and two weeks from now I’m doing a Fulbright applicant mastermind for people that are applying for the international Fulbright awards. So that’s something that if you’re considering as an enrolled student for either your field work or just to have an international experience, a Fulbright is something you can consider. But yeah, we have all sorts of stuff. We even have ProFellow academy, which is another platform for free advising. So you can ask questions, connect with fellowship alumni, have office hours. So yeah, we’re just chockfull of resources. Most of it’s free. So, sign up, get on our mailing list and then you will have access and also get alerts about new fellowship opportunities.

How to Connect with ProFellow

21:26 Emily: Yeah, that sounds amazing. I’m actually trying to think, “oh, is there any fellowship that I could apply for? Does that fit in my life right now?” One of those professional fellowships that you mentioned. So profellow.com, is that the best place to go? Or are you on social? Any other contact information you want to share?

21:41 Vicki: Oh, yes. You’ll find us also on Facebook, Twitter, LinkedIn. But really just go to profellow.com. That’s the place to be. Sign up right on the homepage and that’ll get you right into the database. You can also search our site for all the other great stuff. Be on the lookout for our biweekly newsletter, ProFellow Insider.

22:00 Emily: Yeah. Thank you so much, Vicki for joining me on the podcast today and sharing your expertise with us.

22:06 Vicki: Thank you. Thank you for having me.

Outtro

22:08 Emily: Listeners, thank you so much for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes, a form to volunteer to be interviewed, and a way to join the mailing list. I’d love for you to check it out and get more involved. If you want to support the show and my business, please go to pfforphds.com/helpout. There are plenty of ways to do so without laying out any of your own money. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it doesn’t hurt. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC.

What to Do With Your 401(k) or 403(b) When You Start Grad School

April 29, 2019 by Emily

One of the common perks that companies and organizations give to their employees is access to a workplace-based retirement account such as a 401(k) or 403(b). They may even match your contributions to a degree! Unfortunately the great majority of universities do not give their graduate students access to their 403(b)s. (This does happen rarely, so it’s worth inquiring about.) If you had a 401(k) or 403(b) in a prior job, what do you do with that account when you leave your job for grad school?

Further reading: Financial Reasons to Work Before Starting Your PhD

Your Three Options for Your Workplace-Based Retirement Account

In general when you leave a job, you have three options for what to do with your 401(k) or 403(b).

Leave It Where It Is

Most of the time, your former employer will permit you to leave your 401(k) or 403(b) where it is and continue to manage the account for you while you are in grad school. Employers usually have a minimum balance requirement to maintain these accounts, so your account has to meet that bar.

The upside to this approach is that you don’t have to do anything, and if you liked the investment options and account fees, you can keep using it.

The downside to this approach is that you have to stay in some degree of contact with your former employer and go through them if you want to make any changes to the account.

Roll to Your New Workplace-Based Retirement Account

If you have the option to open a 403(b) with your university, you may be able to roll your previous 401(k) or 403(b) into that account. Again, this opportunity is rarely extended to grad students.

Roll to an IRA

You always have the option when you leave a job to roll your 401(k) or 403(b) into an Individual Retirement Arrangement (IRA). An IRA’s tax advantages are similar to those of a workplace-based retirement account, but you manage the account yourself instead of your employer managing it. Be sure that you have instructed your firms to execute a “rollover” directly to your IRA and not to cash out your account and send you a check, which would be a hassle to correct. You can use an existing IRA account or open an IRA account specifically to receive this transfer.

Which Option Should You Choose?

The general personal finance advice is to always roll your 401(k) or 403(b) when you leave an employer to avoid eventually having accounts scattered across many employers and potentially losing track of one. Whether you should roll into your new employer’s 401(k) or 403(b) or your IRA is debated. If you are trying to optimize the investments inside your retirement account, IRAs have an advantage because the entire world of investment options is open to you, whereas the options inside a 401(k) or 403(b) are only what your employer decides to make available. Sometimes, 401(k) or 403(b) plans are more expensive than what you can get inside an IRA, and since cost minimization is a key tenant of successful investing, again IRAs are preferred.

However, this general advice is not necessarily fully applicable to grad students.

First, your options are mostly likely to be either to leave your 401(k) or 403(b) where it is or to roll it into an IRA.

Second, you may not want to manage your own investments. While managing your IRA can be easy and hands-off, it may still be intimidating, and some students might prefer to simply choose among the options offered by the former employer to opening and managing an IRA.

Third, the investments available to an individual investor inside an IRA may not be as attractive as the institutional-level investments available inside a 401(k) or 403(b) in terms of their fees. To paint with an overly broad brush, 401(k) and 403(b) options at smaller companies and organizations may be more expensive than what you can buy inside an IRA, whereas 401(k) and 403(b) options at larger companies and organizations may be less expensive than what you can buy inside an IRA. So if you were employed by a university or a large company before starting grad school, compare the cost (expense ratios) of your current investment options with those at the brokerage firm you’re considering for your IRA. It may turn out that your existing options are more favorable.

Further reading:

My advice to entering grad students is to roll your 401(k) or 403(b) into an IRA unless you have high-quality, inexpensive investment options inside the workplace-based retirement account and do not want to manage your own account.

Other Advice Related to Retirement Saving

You’re on a great path already by starting to invest for retirement through your job. If at all possible, continue to make excellent choices related to retirement investing during grad school.

Contribute Money to Your 401(k) or 403(b) While You Still Can

It’s a great idea to kick your retirement savings rate into an even higher gear in the months you have left at your job. You’re likely to not have access to a 401(k) or 403(b) again for quite a while, so any additional money you can get into that tax-advantaged account will be a huge boon to your post-PhD self. (Plus, you’re forcing yourself to deflate your lifestyle, which you’ll have to do in a few months anyway!)

However, don’t become so zealous about retirement saving that you compromise your cash position. It’s going to take a good amount of cash to transition into grad school between moving costs, start-up expenses, and university fees. You don’t want to put a lot of money inside your 401(k) or 403(b) only to turn to credit cards to make it until your first grad school paycheck.

Keep Investing for Retirement!

Yes, it is sometimes possible to invest for retirement during grad school, but it heavily depends on your stipend, the local cost of living, and the rest of your financial situation. If you have no pressing debt, enough cash savings for emergencies and short-term expenses, and some excess cash flow, please continue to invest for retirement!

Further reading:

If you have W-2 income as a grad student (typically from an assistantship) in a given calendar year, you can contribute to an IRA. If you don’t have IRA eligibility due to receiving only non-W-2 (typically fellowship) income in a given calendar year, don’t let that stop you from investing for retirement! You can still use a taxable brokerage account. Between tax-efficient investments and your low tax bracket, you are likely to still enjoy tax benefits of investing even outside of an IRA.

Further reading:

Consider Traditional to Roth Conversion During Grad School

During your time in grad school, you may be in a lower tax bracket than you were while at your previous job. Grad students, unless married to someone with a much higher income, are usually in the 12% marginal tax bracket at the highest.

If you have any money in a traditional 401(k), 403(b), or IRA (which you certainly would if you ever received a retirement contribution match from your employer), consider converting it from traditional to Roth during your lower-earning grad school years. It’s pretty unlikely that you’ll ever be in the 12% (or lower) tax bracket again after you finish grad school due to both your personal earning potential and today’s rock-bottom income tax rates, so it makes sense to do the conversion at that low tax rate to gain the benefits of a Roth IRA. (People are flocking to do this type of conversion even in much higher tax brackets!)

Further reading: Why the Roth IRA Is the Ideal Long-Term Savings Vehicle for a Grad Student

When you do the conversion, you’ll have to pay income tax on the full balance of your traditional retirement account. Before you start the conversion process, be sure that you 1) have enough cash to pay the tax and 2) are not bumping yourself into a higher tax bracket with that income infusion.

You don’t have to rush to do this in your first full calendar year as a grad student if you’re not ready, but you should do it as early as you can, and keep an eye on that year in which you expect to finish and get a higher-paying job.

This conversion can be slightly complicated if you only want to convert part of your traditional money in any given year, so be sure to discuss your plans with the brokerage firm that houses your IRA.

Conclusion

Great job on contributing to a 401(k) or 403(b) prior to starting grad school! The positive financial habits you’ve already cultivated will serve you well during and after grad school. If you want to take any steps at all with your existing workplace-based retirement account, they are quite straightforward and easily accomplished.

How to Start Grad School on the Right Financial Foot

April 15, 2019 by Emily

Starting a PhD program is, professionally and personally, one of the most exciting times of life. You’re meeting people who will be your peers and advisors in the coming years whose research interest align with yours, getting acclimated to a new university and city, and of course starting a fresh school year. However, many first-year PhD students, as they’re going to happy hours to get to know their cohorts and buying their textbooks, are thinking to themselves: “Am I going to make it until my first paycheck arrives?” Financially speaking, starting a PhD program is one of the most challenging times of life as well.

The financial challenges of the transition into a PhD program are myriad and the resources are likely to be few. Moving to a new place and starting the school year are expensive endeavors, and sub-optimal decisions around housing and transportation may reverberate in your finances for years to come.

I present this article not to discourage you in what should be an invigorating and hopeful experience, but so that you have time to prepare for its unique financial demands. Starting grad school on the right financial foot means that you are poised for financial success throughout your PhD instead of reeling from the initial financial blow and playing catch-up for months and years to come. Here is what you can do in the months leading up to your transition into grad school to start in a place of financial strength.

Draft a Budget ASAP

It’s vital to put your stipend offer in context as early as possible. The number may strike you as generous-for-a-stipend or meager, but until you know something about the local cost of living it is rather meaningless.

The best way to get an idea of how far your stipend will go is to start drafting a budget and use approximate numbers until you lock in various aspects of your living expenses. Two starting points are the Living Wage Calculator and the estimated room and board from your university’s financial aid office. Neither one of these numbers will prove to be totally accurate (I hope they are both overestimates of what you will pay) but it’s a start for the triangulation.

Your draft budget should include:

The income tax you expect to pay,
Your necessary expenses, i.e., housing, transportation, utilities, groceries, household consumables, clothing, etc.
Your discretionary expenses, i.e., restaurant and bar spending, travel, entertainment, etc.), and
Your education expenses, i.e., tuition and fees required to be paid out of pocket, course supplies, etc.

Further reading: How to Read Your PhD Program Offer Letter

To a degree, you can use your current expenses (if you track them) to estimate what your future expenses will be, possibly with an adjustment for the shift in the cost of living.

It’s quite difficult to drill down into the specifics of what you will spend in a job/life that you’re not yet in, especially if you are not currently tracking your expenses. Therefore, you can use placeholder percentages to help you estimate your expenses and guide your decisions. For example, the Balanced Money Formula states that you should not spend more than 50% of your net (after tax) income on all of your necessities together (including minimum debt payments). This is a challenging benchmark for grad students to adhere to, especially in high cost of living areas, but it illustrates how important it is to keep your necessary expenses in check to the greatest degree possible.

Further reading:

Thoroughly Research Your Housing Options

Housing is by far the largest expense in virtually every grad student’s budget, and first-year PhD students are expected to make this enormous financial decision with little to no insight into the local area. The result is that graduate students often overextend themselves in their housing costs, which are financially, logistically, and emotionally difficult to change.

Starting grad school on the right financial foot means locking in your fixed housing and transportation costs at a reasonable level for your stipend. The general rule of thumb is to spend no more than 25-30% of your net (after tax) income on housing. This guideline proves impossible for many if not most PhD students, who may be paid too little, live in an expensive area, or both.

Further reading: How Much of Your Stipend Should You Spend on Rent?

Particularly in those challenging housing markets, the best course of action to find the most suitable housing (even if you spend more than the guidelines) is to start your search early and thoroughly research your options. I recommend starting your research with a housing survey conducted by your university or graduate student association (if one exists) and senior grad students who are paid a similar stipend to what you will be (e.g., 3rd years and up). From these sources you can ascertain the price range you can expect for housing and potentially tips on the best locations, housing types, and even specific complexes or landlords to pursue.

Further reading: Your Most Important Budget Line Item in Graduate School and Why You Need to Re-Evaluate It

A note on on-campus or university-affiliated housing: On-campus housing is attractive for students moving from a distance because it short-circuits this whole decision-making process. But this type of housing was not all created equal. At some universities, the university housing is subsidized, which means there is likely fierce competition to live in it. At other universities, the university housing is more expensive than comparable non-affiliated housing. You won’t know whether university housing is a good deal and worth pursuing until you talk with current grad students.

Go Frugal on Transportation

Alongside figuring out your housing options and eventually committing to something, you need to decide how you will get around town. If you don’t own a car, you might need to buy one. If you already own a car, you have to decide whether to bring it with you or sell it.

Owning a car, even without a car loan, is a very expensive undertaking. Beyond the cost of the car itself, you typically have to pay for insurance, parking, gas, registration fees, inspection fees, taxes, maintenance, and repairs.

If it is feasible to live car-free in your new city and you don’t currently own a car, I recommend trying to live car-free for your first year. You can always reassess and buy a car at a later time if you decide you want one.

If you decide to buy a car or keep the car you already own, make sure you globally assess your expected costs (not just the best-case scenario!) and write them into your budget. An expensive or newer car costs you more not just in the purchase price but in your insurance premiums as well.

Your transportation and housing expenses are necessary to fix in concert to a degree. If you decide to live car-free, you might choose to pay more to live closer to campus or on a convenient bus route. If you decide to buy or keep a car, you can offset some of those costs by finding less expensive and less convenient housing.

Create a Transition Budget

Most graduate students experience what I call the long and expensive first month of grad school, though I have noticed some universities are working to change this pattern. You must prepare for this long and expensive first month prior to starting your transition to grad school.

The expense of the first month comes from your move. First, the moving expenses themselves: your and your possessions’ transportation to your new city plus the cost of feeding yourself and so forth during that time. Second, the start-up expenses for your new place: first (and last) month’s rent and security deposit, deposits for your utilities, furniture, and stocking your pantry. Third, the expenses of a new school year/term: any money that you must pay to your university in a lump sum and the expenses associated with your coursework.

The long first month refers to the length of time from when you move to your new city until you receive your first paycheck. Personally, I showed up for orientation in mid-August and didn’t receive my first paycheck until the last day of September. Of course, that time includes all your regular living expenses, on the back of your moving expenses.

You want to be sure going into the long first month that you can come out the other side without racking up debt. Saving cash in advance to pay for the transition is the best solution, and a transition budget will help you estimate the total cost.

Build Your Financial Foundation Now

Because you have several months between now and your matriculation into your PhD program, you have the opportunity to establish your financial foundation prior to the challenges of this transition. By financial foundation I am referring to saving cash for the transition, saving an emergency fund, paying off debt, and/or investing – whatever is most appropriate for you right now.

If you currently have a full-time job, you have the most opportunity to shore up this foundation, but even as a student or part-time/gig economy worker, it is still possible to a degree. It will be well worth a few months of sacrifice, either in terms of earning more through a side hustle or spending less through frugality, to start grad school on the right financial foot instead of a few steps behind.

Further reading: Financial Reasons to Work Before Starting Your PhD

After you save the money you need for your transition into grad school, consider whether you can pay off any of your current consumer debt completely (e.g., credit cards, car loan, medical debt, IRS debt). While you can defer student loans while you are in grad school, these other kinds of debts will still require minimum payments even while you receive your stipend, so it’s worthwhile to attempt to knock them out completely.

Further reading:

If you spend the time and effort now on planning out your expenses and saving money, once you matriculate you will be able to focus solely on the stimulating new people and experiences you encounter instead of experiencing financial stress. Starting grad school on the right financial foot by locking in a good deal on housing and not allowing yourself to fall into credit card debt also sets you up for financial success throughout your PhD. An ounce of prevention is worth a pound of cure.

If you would like to me to work with you on navigating your financial transition to graduate school, please check out my financial coaching program exclusively for rising grad students.

How to Read Your PhD Program Offer Letter

March 7, 2019 by Emily

Congratulations on receiving an official offer of admission to a PhD program! This is truly an exhilarating period in your academic career. After celebrating your admission and letting the giddiness wear off, whip out your magnifying glass: It’s time to take a close look at your offer letter to figure out what it actually means. Offer letters can be a bit difficult to decipher (sometimes intentionally!), but this is a vital step so that you go into your PhD program with your eyes wide open regarding your financial situation. This article covers how to discern what your program is offering you regarding your stipend/salary, out-of-pocket tuition and fees, the type of pay you receive and whether it comes with a work requirement, health insurance, “guarantees,” and how your funding package evolves as you move through your PhD program.

If your offer letter doesn’t answer all the following questions (and you’re seriously considering taking it), turn to the offering department’s administrative assistant (for official answers) and/or current graduate students (for this-is-how-things-actually-work answers).

Gross Stipend/Salary

Right away your eye might be drawn to a phrase like “Your total financial aid package is worth…” and some huge number like $50,000 or $90,000. Don’t be distracted by it! You need to know what your actual pay will be – what is usually referred to as your stipend. The letter should delineate between your stipend and the cost of the tuition and fees paid on your behalf. The important take-away is what’s going into your pocket (before taxes) as this is the money that will pay your living expenses and fund your financial goals.

Tuition and Fees (Your Responsibility)

If your offer letter includes funding, it should say that some aspect of your tuition and/or fees will be paid on your behalf. However, when determining how much money you actually get to keep at the end of the day, you have to know: Are you responsible for paying any (partial) tuition and fees out of your own pocket? For example, perhaps your tuition is being paid on your behalf, but out of your stipend you are expected to pay a relatively small fee. Don’t be impressed by huge numbers in tuition and fees being paid for you! What matters is how much you have to pay out of your own pocket; ideally $0 or close to it!

Source of Stipend

Your offer letter will likely tell you the source(s) of your stipend: an assistantship or fellowship. One of the key differences between these two types of funding is whether there is a work requirement.

Fellowships do not have “work requirements,” and to maintain them you are generally just expected to make satisfactory progress toward your degree with respect to your coursework and dissertation progress.

Assistantships do have a work requirement; you are technically an employee of your university. Research assistantships with your dissertation advisor usually allow you to combine your work requirement with your dissertation research (with some exceptions). Teaching and graduate assistantships require you to teach or perform some other kind of service for your university (most often officially capped at 20 hours/week), after which you are free to work on your coursework and/or dissertation.

It’s vital to know whether you have a work requirement in your first year or really any requirements to maintain your funding (e.g., attending a seminar series, submitting progress reports). If you don’t meet those requirements, your funding could be revoked.
Your stipend offer letter should clearly state what your work requirement is or whether you need to secure one prior to the start of the school year. For example, you might be offered funding from a teaching assistantship, but it could be still up to you to actually arrange with a professor to TA a certain course.

Knowing about a work requirement will help you properly envision how you’ll spend your time during your first year in your PhD program.

Duration of Stipend

Your offer letter should tell you over what period you will be paid your stipend. Ideally, the answer is 12 months, although carefully note if the source of the stipend changes during that time. (For example, I was paid in my first 9 months of graduate school by a training grant and in the next 3 months by a research assistantship, and this was all spelled out in my offer letter.) If the offer letter says the stipend lasts any period shorter than 12 months, you need to follow up: Does that mean you actually won’t be paid (you’ll have to plan financially for that, obviously) or that you are going to have to secure other funding after the initial period?

Who Pays What for Health Insurance?

Health insurance is a huge issue for graduate students, and universities handle it differently. The key answers you need from your offer letter are:

Will you have an opportunity to buy student health insurance through the university? (Almost certainly the answer is yes.)
What is the yearly premium for the student health insurance?
If you sign up for student health insurance, is the premium paid on your behalf (similar to tuition and fees) or do you pay (part of) it out of pocket?
Are dental and vision insurance bundled along with health insurance, or would you have to buy them separately?

Even if you plan to stay on your parents’ insurance for some years at the start of your PhD, it’s important to understand what you may be paying for premiums once you switch to insurance through your university.

Is There a Guarantee?

Does the word ‘guarantee’ appear anywhere in your offer letter, e.g., is your funding guaranteed for 2 years, 5 years? A guarantee is nice to have, but it shouldn’t necessarily be a deal-breaker. If you don’t have guaranteed funding throughout your PhD (which might very well go beyond 5 years!), find out from current students whether students all pretty much stay funded or whether funding becomes tight/competitive in later years.

What Happens after the First Year?

Probably of the most important things to know about funding during your PhD is what happens in later years. A PhD is long, after all, and your offer letters might only discuss funding in the first year. Your offer letter might include hints of funding changes in the future, such as by saying you received a first-year fellowship or one-time bonus, or saying that your funding source will change starting in your second year.

You should be particularly wary of your stipend decreasing after your first year due to a one-time/first year-only bolus of money (a promotional offer, so to speak). It would be quite painful to find out at the last minute that your stipend is going down and have to scramble to adjust your living expenses. Better to build your life and budget around your ongoing stipend amount and use the first-year increase for one-time expenses or savings.

If you are seriously considering accepting an offer, you should definitely inquire about what funding looks like in the second and following years. The departmental administrative assistant may not be able to say for sure what will happen in your case, but he/she and current students can tell you the precedent.

What will my after-tuition/fees stipend (and its term) be in my second and subsequent years (lower, higher, pretty much the same)?
What will the source of my funding be in later years, and am I responsible for securing it? (For example, in your first year you might be funded from a training grant so you can rotate among potential advisors, but starting in your second year you must secure a research assistantship with your dissertation advisor.)
Are yearly cost-of-living raises typical?

Don’t be dazzled by a pumped-up first-year offer if the reality behind it is a department where students compete with one another for limited funding and you’re paid the same stipend in your fifth year that you were in your first!

You can see that to properly understand your funding during your PhD you need a lot more information from your stipend offer letter than just the number that will hit your bank account each month! Again, you only need to investigate beyond the offer letter to the degree that you are considering accepting the offer (most likely based on other factors). But even if you don’t care about money at all, I strongly encourage you to find answers to these questions for the program that you ultimately accept before you commit to a lease or move.

Financial Reasons to Work Before Starting Your PhD

January 21, 2019 by Emily

College students who aspire to earn PhDs often ask themselves if they should proceed directly from undergrad into a PhD program or take a year or more “off” to work. From a career perspective, there are some arguments on either side (and it’s probably field-dependent), though personally I think it’s better to not go straight from college to grad school. However, from a financial perspective, working for at least a year prior to starting grad school is a slam-dunk better choice – provided you handle your salary the right way in the meantime.

I’ll assume in this article that you’re earning more in your post-college job than you will as a grad student. I know that’s not always the case (my postbac fellowship paid a stipend comparable to that of a grad student), and if it’s not true for you, simply pick and choose the advice that works for you.

This article provides financial arguments for working prior to starting a PhD and gives you a strategy to combat the biggest potential downside to doing so. Working before starting a PhD program gives you the best shot at starting grad school (and the rest of your life) on the right financial foot.

Save Cash for Start-Up Expenses

Starting grad school, especially if you have to move to do so, is a cash-intensive endeavor. It can be done on the cheap depending on your city, but you are looking at paying for much or all of this before receiving your first grad student paycheck:

Moving expenses
First month’s rent (maybe last as well)
Security deposits, installation fees, and/or service fees for housing and utilities
All your normal living expenses like food, transportation and personal care for a month or more
Fees (and possibly tuition) if not covered by your program, e.g., parking or an insurance premium
Textbooks and other course-related expenses

Those expenses are similar to any that you would incur if you moved for a job, but in addition you have the educationally-related ones and you most likely will wait over one month for your first paycheck to arrive instead of the two weeks to one month typical for a job.

If you work prior to starting grad school, you have the opportunity to save for those start-up expenses. If you don’t have enough savings available when you matriculate, you’ll start grad school already feeling financially behind.

Build a Strong Financial Foundation

Working prior to starting grad school also means you can improve your overall financial health compared to where you were when you finished undergrad. You can work on one or more of these goals right away:

Saving cash for an emergency fund and short-term irregular expenses
Paying down debt (prioritize high interest rate debt such as credit cards and unsubsidized student loans)
Contributing to a tax-advantaged retirement account such as a 401(k) or IRA

Starting grad school doesn’t necessarily mean stalling financially, but it is easier to make progress with a salary intended to do more than pay basic living expenses.

Further reading:

Investing for Retirement

I already mentioned retirement saving above, but it’s worth emphasizing again. Saving for retirement during grad school is a challenge. This is due primarily to your limited cash flow, but in addition grad students are sometimes disallowed from contributing to any kind of tax-advantaged retirement account due to their income type. If you receive only fellowship income throughout an entire calendar year, you will not be able to contribute to an IRA. It is also exceedingly rare for a grad student to have access to a workplace-based retirement account like a 403(b).

Further reading: Taxable Compensation or Earned Income

Getting an early start on retirement investing will make an enormous difference in your account balances once you reach retirement. For example, if you work for one year until age 23 and contribute $1,000 per month to a retirement account, just that $12,000 contribution alone can grow to approximately $434,000 by the time you are 68 (assuming an 8% average annual rate of return.

Further reading: Whether You Save During Grad School Can Have a $1,000,000 Effect on Your Retirement

If you have to slow down or stop retirement investing during grad school, you can still feel good about the investments you already have in place that are working for you in the background.

If your employer provides a retirement match, please contribute enough to get the full match! It’s going to be a long time before that opportunity comes around again.

Applying Everywhere that Is a Fit

Grad school applications can easily cost over $1,000 between the direct application fees and indirect costs like taking the GRE. If you are working when you apply instead of doing it during college, you will have more money (and time) to apply and visit everywhere that is a good fit for you. It would be such a shame for a low budget for applications to constrain your career choices.

Further reading: The Full Cost of Applying to PhD Programs

Start a (Passive) Side Hustle

Side hustling during grad school is a great way to earn some extra income, maintain an identity and emotional outlet separate from your research, and potentially improve your post-PhD career prospects. But when you’re busy with research, classes, and/or teaching, it can be difficult to put in the time and energy needed to get your side hustle off the ground.

It’s much easier to maintain a side hustle you established prior to starting grad school (or you could continue some aspect of your job as a side hustle). An ideal side hustle for someone anticipating entering grad school is one that is location-independent and time-flexible.

The perfect side income for a grad student is not a “hustle” at all but passive income. Passive income comes in many forms, but requires an up-front investment of time or money to establish the income stream with little to no additional work required on an ongoing basis.

Minimize Your Tax Burden

In our current low tax environment, I don’t talk about tax planning, that is, changing your behavior due to the tax implications. I don’t like to let the “tail” of tax repercussions wag the “dog” of the rest of your life. However, in this case, I want you to at least be aware of the tax implications of starting a PhD program right away vs. waiting a year or two.

There are two big tax effects of having a “student” status (i.e., being a full time student in at least part of five months in the calendar year) and also being young (i.e., 23 or younger on 12/31 of the year in question).

Dependent

Normally, being considered a dependent of your parents expires at age 18, but students can be claimed as dependents up until the year they turn 24. Generally speaking, being claimed as a dependent is bad news for your tax return and good news for your parents’ tax return (or whoever is claiming you).

There are a few ways to avoid dependency status in the year you exit undergrad and/or the year you enter grad school, all of which can be more easily accomplished by working in between:

Live apart from your parents for at least six months of the year you finish undergrad (assuming you graduate in the spring) and continue to do so until the year you turn 24 (at least).
Wait to start grad school until at least the year in which you turn 24.
Provide at least half of your own “support.” Support is basically all your expenses, both living expenses and educational expenses. If you provide at least half of that support through your own income (taxable fellowships and loans count, but scholarships do not), you are independent. This is much easier to accomplish if you earn a higher income and minimize your educational expenses in any year that you are under age 24.

Kiddie Tax

The Kiddie Tax is bad news for the “kid” subject to it (that’s you, potentially) as it imposes a much higher tax rate on “unearned” income than what you would have on ordinary income. Weirdly and unfortunately, fellowship income is considered “unearned.” If you are a student, under age 24, and do not provide more than half of your own “support” with ”earned” income, your “unearned” income is subject to this higher tax rate. You do not have to be a dependent for the Kiddie Tax to apply to you.

How do you avoid the Kiddie Tax through tax planning? 1) You can wait to start grad school until the year you turn 24. 2) If you start grad school prior to the year you turn 24, make sure you have enough “earned” income in each year you are a student to cover at least half of your own “support.” Keep in mind that “support” includes educational expenses.

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How to Make the Most of Your Salary and Start Grad School on the Right Financial Foot

Have you ever heard the advice to “live like a college student” or “live like a resident?” Take that a step further and “live like a grad student” in your working years prior to starting grad school.

Further reading: Is “Live Like a College Student” Good Advice?

The advantages to living like a grad student when you have a job are three-fold:

You will get a head start on the essential financial skills you’ll need during grad school, such as budgeting, frugality, and saving.
You will rapidly increase your net worth through saving and/or debt repayment because you will be living far below your means.
You will avoid experiencing the very painful process of decreasing your standard of living when you enter grad school.

Living like a grad student when you have a better-paying job is definitely a sacrifice, but it’s one that is well worth it. I often speak to grad students who worked prior to starting grad school, and their common refrain is “I wish I had saved more when I had the chance!”

prospective grad student

Links Mentioned in the Episode

Teaser

Introduction

Will You Please Introduce Yourself Further?

Tell Us More About Your FASEB Internship

How to Land a Science Policy Internship

What is the Graduate Student Savings Act?

How Abby Got FASEB to Endorse the GSSA

Personal Impact of Flawed Tax Legislation

Commercial

Anything Else About Your Role in FASEB?

What is the SECURE Act?

How Will the Internship Help Your Future?

Final Advice for Early-Career Grad Students

Outtro

Links Mentioned in the Episode

Teaser

Introduction

Will You Please Introduce Yourself Further?

How Do You Define “Fellowship”?

How to Use ProFellow to Find Fellowships

How Do You Maintain the ProFellow Database?

Applying for Academic Fellowships

How to Get Ahead of Fellowship Deadlines

Commercial

More Advice for Fellowship Applicants

How to Stand Out as a Fellowship Applicant

Fellowships: More than Just the Fellowship

How Often Should I Apply for Fellowships?

Final Advice for Fellowship Applicants: Be Yourself

Additional Resources at ProFellow

How to Connect with ProFellow

Outtro

Your Three Options for Your Workplace-Based Retirement Account

Leave It Where It Is

Roll to Your New Workplace-Based Retirement Account

Roll to an IRA

Which Option Should You Choose?

Other Advice Related to Retirement Saving

Contribute Money to Your 401(k) or 403(b) While You Still Can

Keep Investing for Retirement!

Consider Traditional to Roth Conversion During Grad School

Conclusion

Draft a Budget ASAP

Thoroughly Research Your Housing Options

Go Frugal on Transportation

Create a Transition Budget

Build Your Financial Foundation Now

Gross Stipend/Salary

Tuition and Fees (Your Responsibility)

Source of Stipend

Duration of Stipend

Who Pays What for Health Insurance?

Is There a Guarantee?

What Happens after the First Year?

Save Cash for Start-Up Expenses

Build a Strong Financial Foundation

Investing for Retirement

Applying Everywhere that Is a Fit

Start a (Passive) Side Hustle

Minimize Your Tax Burden

Dependent

Kiddie Tax

How to Make the Most of Your Salary and Start Grad School on the Right Financial Foot

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