It's not easy being a graduate student -- chances are, you're not making a lot of money and you're definitely not thinking too much about retirement. Nevertheless, retirement is coming your way, and it's not a terrible idea to start thinking about how you're going to prepare for it. Hopefully, this post will go a little way towards starting a long-term conversation about the 5+ years that people trade for a degree. One of the clearest places where there is a tradeoff is in retirement savings (typically done in the US with 401k plans and IRAs.)
Assume that we have 3 individuals. They all graduate from college the same year, they're all the same age, gender, whatever. At year 0, they decide to take 3 different paths, as shown below:
Chemist A: takes B.S. immediately, goes to work for 50k, gets 1% raise a year, contributes 5% of salary to a 401k, gets a 1.5% match. Chemist A contributes 3k every year to an IRA. All investments get 5% return.
Chemist B: goes to grad school, gets Ph.D. in 5 years, goes to work for 80k, gets 1% raise a year, contributes 5% of salary to a 401k, gets a 1.5% match. After graduating, Chemist B contributes 3k every year to an IRA. All investments get 5% return.
Chemist C: goes to grad school, gets Ph.D. in 5 years, goes to work for 80k, gets 1% raise a year, contributes 5% of salary to a 401k, gets a 1.5% match. In Year 1, Chemist C contributes 3k to an IRA (life savings?) and only $500 a year for the rest of graduate school. All investments get 5% return.
After 25 years, what are their total nest eggs?
Chemist A, B.S. (year 25 total nest egg): $314,125.04
Chemist B, Ph.D. (year 25 total nest egg): $285,501.86
Chemist C, Ph.D. (year 25 total nest egg): $300,895.18
The spreadsheet is here, if you would like to check my figures.
From this point of view, the 5 years in graduate school will "cost" somewhere around 30k in retirement savings (all things being equal.) With a $5,000 investment during graduate school, you can recover about 15k (or about 50%) of those lost retirement savings.
Now, the caveats to this sort of figuring are pretty darn long, but let's list a few. First, it's a little bit unfair to compare a 25 year career with 20 year careers. Also, Chemists B and C could put more of their salaries into their IRAs (you'll note their 401ks end up bigger than Chemist A.) Do remember, their net worths could be very different, too. There aren't big promotions figured into this calculation, or job switches, or layoffs or any of the other things that actually make up real life. Chemist C could have a nasty gambling habit, Chemist A could enjoy investing in real estate in Belize, no investment this side of Bernie Madoff has a steady 5% return with no dips, you get the idea.
Going to graduate school for an extended period (longer than 2 years?) basically puts parts of your life on hold. Whether or not you want to admit it, there are costs associated with that pause; contributing to a very basic IRA (Vanguard Total Stock Market Index, anyone?) might be a way of alleviating some of those costs.