Help a College Junior!

**jpg7n16** · 01-18-2011, 11:46 AM

Originally posted by facebookdigg123 View Post

Hey everyone,

I am a junior in college who is looking to go to medical school after undergrad. I am on this really sweet scholarship where get a stipend every month to go to school, so I have some money sitting in my savings account at a 1.3% interest rate. I originally wanted to keep the money liquid because I was planning on using it to help pay for my medical school, but now my mom said she is willing to help me pay for med school using some of my dad's life insurance money. What should I do with the money in my savings to get a better rate of return? (I have no debt of any kind, or a car to worry about)

Wow how did we miss this post?? Sorry!

And also sorry to hear about your dad. Wishing your family the best.

As far as what to do with the money, you have to look at the potential time horizon before you need the money again. So if you won't need the money again until retirement, it should go into a retirement account. If you might need that money for a home downpayment, say 7-8 years from now, then it should be invested in stocks - but not in a retirement account; use a normal low-fee brokerage account. If you need the money in less than 5 years, look into more secure investments like mid-term bonds. And if you might need the money to cover non-tuition expenses in the next 2 years, just keep in cash like you already have it.

Also keep in cash if you have no EF in place. You likely need 3 months expenses held in cash. Anything above that can be invested per the guidelines above.

Also, since my dad had an IRA rollover account, my brother and I have to split the money since for some odd reason my mom wasnt listed as the beneficiary. What the brokerage told me was that the IRA account becomes our beneficiary account where we have to either start withdrawing the entire sum immediately, or make withdrawals by dec 31st of this year for either our lifetime or a 5 year period. Is this correct? I really wouldnt have a need for this money immediately, and what would tax situation look like (I know I should probably talk to a tax advisor about this).

By the way, if your mother needs the money, she may have a case to claim a portion of it. From what I remember, spouses can only not be a beneficiary if they signed a consent form.

And I have a chart for this type of withdrawal back at home, so I can't say exactly. But that sounds about right.

See an inherited retirement account guide here: Schwab: You've just inherited a retirement account. Now what?

You can read up on withdrawal requirements from an IRA here: Publication 590 (2009), Individual Retirement Arrangements (IRAs)

Also, am I allowed to open a roth ira account? I don't have a job, but since I get a monthly stipend, I get taxed on that money.

thanks for the help

In order to contribute to a Roth IRA, I know you need to have earned income (compensation) of more than the contribution amount. And I think if you have to include the stipend in your personal taxable income, then you can contribute up to the amount of that income, but I'm not 100% sure. If it is income from your father's retirement account, it don't think that qualifies.

But I'm really not sure what characteristic of income your stipend would be. That is a good question for a tax professional. Sorry I can't be of more help there.

**facebookdigg123** · 01-19-2011, 02:59 PM

thanks for the help and the links!

Help a College Junior!