Sen. Elizabeth Warren, D-Mass., along with other senators reintroduced legislation on Tuesday to allow funds from graduate students’ stipend or fellowship to be deposited into an Individual Retirement Account.
Sens. Mike Lee, R-Utah, along with Ron Wyden, D-Ore., and Tim Scott, R-S.C., joined Warren in reintroducing the bill, the Graduate Student Savings Act of 2019. The senators said that federal and state governments generally tax fellowship or stipend funding as income, which does not qualify as “compensation” and therefore cannot be saved in an IRA.
“Graduate students deserve a chance to start saving for retirement,” Warren, who is also running for president in 2020, said in a statement. “This bill will make it easier for students to graduate with a degree and a head start towards a financially-secure retirement.”
While a majority of doctoral students report receiving some of their financial support during graduate school from fellowships or grants, about a third of all students report that fellowships or grants were their primary source of funding, the senators noted in a joint statement.
“Grad students are investing in their futures through education, and they should be able to invest in their futures by saving for retirement, too,” added Wyden. “When grad students want to make smart choices about their savings, outdated tax rules shouldn’t stand in the way. This is commonsense legislation with support on both sides, so I’m hopeful we’ll be able to get it across the finish line soon.”
Doctoral students generally take seven years to finish a degree, “potentially preventing students from saving portions of their income in a tax-advantaged account for a significant period of time,” the senators said.
The Graduate Student Savings Act of 2019 is supported by Betterment and Fidelity Investments, as well as several unions, including the Service Employees International Union and American Federation of Teachers.
Ken Hevert, senior vice president of Retirement at Fidelity Investments, said in the statement that all Americans “should have access to tools that can help them save for retirement. People are living longer yet often have fewer sources of lifetime income, so the earlier they can place some money in an IRA, the bigger the impact down the road.”
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