You earned it — that bonus you’ve been working toward all year. Congratulations! I’m sure it feels great to see it hit your account, and it should. Now the question is: What do you want to do with it?
Beyond that essential question, there are a few often overlooked aspects of receiving extra income that are worth considering.
Whenever my clients share the exciting news of a bonus, first we celebrate, then we explore a few key areas together. If you find yourself in this happy circumstance, these same considerations may be helpful as you decide what feels right for you. Being thoughtful here can help you make the most of your dollars while staying aligned with your broader financial goals.
Looking for a financial advisor who combines financial planning, investment and tax strategies to help you reach your goals? That’s us! Schedule a time now to meet an advisor.
3 Things To Consider When You Get A Bonus
1. The Tax Implications
While some employers use their own payroll calculations, many follow the IRS approach for supplemental wages. For 2026, that means bonuses under $1 million are often withheld at a flat 22% federal rate.
Depending on your overall income, that rate may be lower than your actual tax rate. For example, if your income places you closer to a 30% effective tax rate, the amount withheld on your bonus would not fully cover what’s ultimately owed.That could pose a problem: Even if you’ve been withholding the right amount from your normal paycheck, you’ll end up owing money when tax season comes around.
If you’d prefer to avoid a larger tax bill at year-end, one option to consider is making an estimated tax payment. Paying a portion now can help spread the impact out and reduce what’s due next spring.
If this approach feels right, you can estimate the additional amount owed and submit a payment directly through IRS.gov.
2. Your Financial Goals
The second thing to consider is your plan for the money. It’s best to have a plan in place before it arrives because, let’s face it, we’re all human! If you see a lot of extra cash in your account, you’re likely going to find yourself spending a little bit more and leaning into some larger purchases.
Before spending, think about your financial goals. Is there something you’re working toward for the future? You may be considering a house purchase or building up an education fund, for example, and this extra money could move you toward those goalposts faster.
If you do decide to spend, a good rule of thumb is to spend half and save half. Maybe you save it to cash or maybe you invest it in the market; either way would be a good use of those funds.
3. Your Retirement Contributions
Do you have an automatic contribution set up to your retirement account from your paycheck? If so, your bonus will typically follow that same instruction. Whatever percentage you’ve set, the same portion of your bonus may be directed into your retirement account.
Depending on your goals, that may be exactly what you want — or it may not. For example, a large bonus could fully fund your 401(k) for the year, or even push you beyond your intended contribution level. It can also reduce the amount of your bonus available for other priorities.
If you’d like more flexibility, you might consider adjusting your contribution rate ahead of time. Just be sure to allow enough time for HR to process any changes.
On the other hand, some people intentionally use their bonus to accelerate retirement savings. They may temporarily increase their contribution rate to maximize their 401(k), then adjust it afterward for the remainder of the year.
As bonus season approaches, it can be helpful to revisit your contribution rate and decide what aligns best with your goals.
Make The Most Of Your Bonus
Your bonus can work hard on your behalf, but only if you give it a job to do! By understanding the tax implications and connecting it with your larger financial goals, this extra income can truly support the life you want to build.
If you’re looking for guidance, feel free to get in touch with us here at Curio! We’d love to hear about your dreams and help you realize them by capitalizing on moments just like these.
