Bonus Payout

bhJogdt — Mon, 24 Feb 2025 19:51:03 GMT

how to handle bonus payout.i have two option from my company one is it can be regular lump sum payment and second

I also have the option to contribute all or part of your bonus payment to your 401k account.

I don't know for sure which one is best option for tax purposes.which option takes less taxes? I do contribute on my 401K every paycheck so rather than contribute to every paycheck if I contribute up to the limit of 2025 in one time is this good way to do it. another scenario I have to consider is company is matching 3% of my first 6% contribution so don't know which would be best option.

I appreciate any help in this matter, Thanks

Re: Bonus Payout

ThomasM125 — Mon, 24 Feb 2025 20:07:19 GMT

Since the company matches your contribution up to 3% of your wages, you would want to contribute at least 3% of the bonus to your 401-k to get the free money from your employer. After that, it is likely the more you contribute the more tax you will save, so if you don't need the money it would be advantageous to put as much as you can into the 401-K. To see how much tax you will save, you can multiply your marginal tax rate by the amount you contribute to get an idea of how much tax you will save. Here is a link to an IRS article on federal tax rates.

It wouldn't matter if you contributed all of the money at once versus spreading it out over the course of the year through weekly payroll deductions. It is the same deduction either way.

Also, in the log run you will have to pay tax on the contributions when you take the money out in retirement, but perhaps at a lower rate of tax. So to some extent you are differing tax on the pension plan contributions, not eliminating it.

topic Re: Bonus Payout in Retirement tax questions

Bonus Payout

Re: Bonus Payout