U.S. senators introduced bipartisan legislation Tuesday that seeks to help graduate students amass more of a retirement nest egg, building on government efforts at both the federal and state levels to address the country's retirement savings shortfall.
The
Graduate Student Savings Act of 2016, introduced by senators on opposite ends of the political spectrum — Democrat Elizabeth Warren of Massachusetts and Republican Mike Lee of Utah — would amend the tax code to allow funds from a stipend or fellowship to be deposited into an individual retirement account. The rule would apply to graduate students and postdoctoral fellows.
Although these funds are currently taxed as income, the government doesn't consider them compensation, meaning they can't be saved in an IRA.
“The complexity of our tax code and the incentives to save for retirement have unfortunately left many post-graduate researchers in a position where they are unable to take advantage of tax-deferred retirement savings programs like IRAs. This bill makes a very simple change to the code to fix this inequity,” according to a statement from Mr. Lee.
About one-third of doctoral students say fellowships or grants are their primary source of funding, according to a news release.
Prior to this bill, Ms. Warren jumped headlong into the retirement savings picture through her
steadfast support of a Labor Department rule finalized in April that raises investment advice standards for retirement accounts.
The senators' legislation comes amid a broader government push to strengthen retirement security.
Several states are weighing schemes such as an auto-IRA to boost retirement savings among workers with no access to a workplace savings plan. The Obama administration has been a proponent of establishing an auto-IRA program at the federal level, and absent enough political support,
created the myRA program as a voluntary starter savings plan for those without workplace retirement plans.
Democrats in the House of Representatives recently called on President Barack Obama to
require federal contractors to put their employees in retirement plans.
Separately, a bill put forth in January by Jeff Merkley, D-Ore., would provide
universal retirement coverage for all Americans.
