6 Smart Ways to Use Your Year-End Bonus
If you have bonus money remaining, you should split it toward your next two financial priorities: having six months of expenses in an emergency savings account, and maxing out on your retirement contribution for the year.
You can contribute to your retirement using your bonus in a couple of ways. Many companies will automatically deduct from your bonus for your 401(k) at the same rate as usual. You can also ask your company if you can have a special withholding for your bonus. You’ll fill out a form to designate up to 100 percent of your bonus to your 401(k). This will not only get you closer to a great retirement, it will save you big in taxes. If you can’t direct that money to your 401(k), and you’re eligible for an IRA, consider maxing that out instead.
If you’re financially healthy in these areas and have some of your bonus left over, congratulations! Move on to step four.