Adventures in (Post) Gradland

Thoughts on life after the PhD

Life After Grad School: Investing Your Money

I seem to read a lot these days that, for my generation, a lot of the traditional “markers” of adulthood are missing. Or they show up much later in life. Things like marriage, children, purchasing a new car, buying a house or an apartment instead of renting–these things simply aren’t inevitable for a lot of thirty- and even forty-somethings. Which might explain why, when I asked myself, “How should I start to plan for retirement?”, I had no clue where to begin.

For my mother’s generation, I think the answer was fairly simple: your husband will take care of it. Which was all right for some but didn’t work out so well for the ones who got divorced and then suddenly found themselves scrambling to get a handle on their finances. I’ll admit that until very recently, I really couldn’t comprehend the idea of saving for retirement. It was so far away (at least I hoped it was), and I was living hand to mouth, like most humanities grad students. I could barely put away a hundred dollars a month to pay my phone and Internet bills, much less sink a few hundred dollars into an investment account every month. Someday. But not now.

Well, someday’s kind of here, because I’m actually earning money now, and while there aren’t any guarantees, it looks like I might be on track to make a steady income for a while. Unfortunately my basic Internet searches on financial planning just served to confuse me more–even the “financial planning for dummies”-type websites threw around terms and figures that I didn’t understand. So after a brief “I’m a walking Lady Who Knows Nothing About Money stereotype” moment of depression I got in touch with a financial planning company and asked them what my options might be.

The company asked me some VERY personal questions that I wasn’t quite sure how to answer (How serious is your current relationship? Do you plan to have children within the next five years? Do you plan to marry? How much longer will you remain in Japan, and if you do leave, where will you go?). One thing about retirement planning–you’ll have to take stock of a lot of things, maybe before you’re really ready.

After doing a basic evaluation of my income and future plans, the company sent me a thick packet via registered mail–glossy booklets detailing financial plans that looked designed for people with lots and lots of money. People who, judging by the brochures, wore suits every day and had boats. I took a few days to think it over and then told them I would keep looking.

A U.S.-based financial adviser that my mother hooked me up with recommended a Roth IRA, one of those terms that I’d heard thrown around for years but had never fully understood. IRA stands for “Individual Retirement Account,” and basically it means that you deposit a certain amount of money every month into a special account until you retire. As long as you don’t withdraw the money, it’s not taxable. And IRA funds can be invested in all manner of mutual funds that will accrue interest and make your money “grow” instead of just sitting in a bank.

This is where it gets confusing, because I have no clue what kinds of funds or stocks I would want to invest in–I just want to plop my money somewhere and hope that it grows modestly until I’m around 70. And I don’t know the logistics of opening a Roth IRA when you’re living overseas and making your money in yen instead of dollars. Luckily my local bank seems ready and willing to explain everything for me, so I’ll let them give me some advice when I’m back in the States in May.

A few things I’ve learned from this (so far very brief) experience with trying to invest my money:

1. It’s never too early. The bank was pretty surprised when I asked about IRA’s–apparently most people start investing much later in life. Which might be all right if you’re making a six-figure salary or close to it, but if you’re like me and will probably never move out of a certain salary bracket (barring divine intervention or writing The Book of the Century), you need to start EARLY. Because it takes a long, long time to save up enough money even to live modestly after you retire. So even if it’s less than a hundred dollars a month…or less than fifty dollars a month…start putting money away as soon as possible.

2. Be realistic. Don’t sign up for an investment plan that demands a very high monthly contribution. You might think that you can realistically put away $300 a month, but the general advice is to take whatever you THINK you can save and cut it in half.

3. Don’t be afraid to ask the tough questions. Not just to a financial adviser–to yourself. Thinking seriously about money forces you to think seriously about a lot of other things–your marital / single status and what it means, your plans to have (or not have) kids, where you want to live, how long you plan to be at your current job, etc. Too many people wait too long to confront these questions, and sometimes by then they’re in a financial mess and it’s too late.

4. Explore a lot of options. Don’t let yourself be pressured–by family, a financial planning company, or anyone else–into a retirement plan that doesn’t feel right. In the end if it’s all too much you can just start by opening an extra savings account.

I guess planning for retirement is just one of many stages of becoming a grown-up. Which might explain why I now have the urge to run outside and hula hoop.

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3 comments on “Life After Grad School: Investing Your Money

  1. danrudminn
    February 10, 2012

    Invest it all into bitcoins, futureproof!

  2. Kairu
    July 17, 2013

    Hi (post) Grad life, I had to read up a lot on investing during grad school when I realized my non-academic peers were 10-15 years ahead of me due to their regular jobs with retirement benefits. Anyway, I recommend reading _A Random Walk Down Wall Street_ by Burton Malkiel and John Bogle’s book On Mutual Funds. They are easy to understand and clarify a lot of things about retirement investing. If you don’t have time for that, the website http://www.coffeehouseinvestor.com has investment advice and a sample portfolio based on their ideas. But if you find the coffeehouse too difficult, just go with the “Couch Potato Portfolio” voted the easiest/best passive portfolio for retirement a few years after it came out. Here’s a link:
    http://assetbuilder.com/couch_potato/couch_potato_cookbook

  3. gradland
    July 17, 2013

    Thanks Kairu! At the moment I’m still dealing with the problem of being a U.S. citizen living overseas who wants to invest in the U.S.–the U.S. banks request something but then the Japanese banks won’t provide it, then the Japanese banks request something and the U.S. banks won’t provide it, ad infinitum. I’ll check out all those links, though, and at least get myself up to speed on options. Thanks again!

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Anne McKnight

writing•translation•scholarship on Japan (and a few other things)

A Modern Girl / モダンガール

tales of travel, research, and life

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