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December 19, 2025

Money Matters
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How to Use Your Holiday Bonus to Maximize 401(k) and IRA Contributions

Jatniel Brito
5 minute read

The end of the year brings all kinds of good things. Time with loved ones, festive food, and maybe even a holiday bonus. Whether it’s a big surprise or something you’ve been counting on, that extra money can feel like a breath of fresh air.

While it’s tempting to spend your bonus on gifts, travel, or a new gadget, there’s another option that can make an even bigger impact: using your holiday bonus to strengthen your retirement plan. Even a small portion of your bonus can boost your 401(k) or IRA, set you up for long-term goals, and give your future self a gift that really lasts.

Why Your Holiday Bonus Is a Great Retirement Boost

Holiday bonuses have something your regular paycheck doesn’t: flexibility. They’re not tied to rent, groceries, or monthly bills. Because it’s extra income, it’s one of the easiest dollars to redirect into long-term goals.

Plus, contributing at the end of the year means your money gets invested sooner. Thanks to compound interest, even a small bonus today has the ability to grow into a larger sum years down the road. Think of it as a gift your future self will thank you for.

Maximize Your 401(k) with Your Bonus

If your employer offers a 401(k), putting part of your bonus toward it is one of the simplest ways to boost your retirement savings.

Why it can be worth it:

  • Tax advantages: Traditional 401(k) contributions lower your taxable income now,  Roth 401(k) contributions grow tax-free for retirement.
  • Maximize employer match: Extra contributions at year-end help you capture every matching dollar available.
  • Boost retirement savings: Even a single bonus contribution can give your nest egg a meaningful jump.
  • Flexible timing: Year-end contributions let you strategically plan around bonuses and deadlines.

‍

Roth vs Traditional IRA: Which is Better for Your Holiday Bonus?

If you’re not already funding an IRA or want to add a little extra, your holiday bonus can top off a Traditional or Roth IRA.

Why this can work:

  • Long-term growth: Both IRAs are designed to help your savings grow over time.
  • Flexibility: No employer involvement is needed. You can transfer a portion of your bonus whenever you’re ready.‍
  • Low pressure: Your bonus may not cover the full annual limit, and that’s okay. Even a few hundred dollars makes a difference.

Let’s Make Retirement Simple Together.

Got old 401(k)s? Rolling them into a PensionBee IRA takes only a few minutes and helps organize your retirement savings.

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Retirement Contribution Limits (2025 & 2026)

401(k) Contribution Limits

Year Standard Contribution (Under 50) Catch-Up Contribution (50+) Total Contribution Limit (50+)
2025 $23,500 $7,500 $31,000
2026 $24,500 $8,000 $32,500

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Traditional and Roth IRA Contribution Limits

Year Standard Contribution (Under 50) Catch-Up Contribution (50+) Total Contribution Limit (50+)
2025 $7,000 $1,000 $8,000
2026 $7,500 $1,100 $8,600

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Using your bonus to fund your 401(k) or IRA can help you reach contribution limits, benefit from tax advantages, and use catch-up contributions if you’re 50 or older.

Retirement Deadlines to Know

Using your holiday bonus for retirement can be a smart move, and knowing the deadlines helps you make the most of it.

  • 401(k): Contributions must be made by December 31 to count for that year
  • IRA: Contributions can be made until April 15 of the following year.

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Allocating your bonus strategically ensures your money counts for the right year and maximizes retirement planning opportunities.

What This Means for Your Future

Giving your retirement accounts a year-end boost adds more than money, it adds momentum. Over time:

  • Contributions grow and compound.
  • You develop intentional financial habits.
  • Build a stronger sense of retirement readiness.

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Using your bonus for retirement can help you feel more prepared, less stressed, and better positioned for the future.

You Deserve a Future You Feel Good About

Before your bonus disappears into December expenses, consider using it to make a confident, intentional step toward your retirement goals. If you have old 401(k)s or IRAs, PensionBee helps make it simple to roll over your old 401(k)s and IRAs into a single account, with a 1% match available on every rollover and contribution (terms and conditions apply). With diversified portfolios with ETFs like SPY and MDY from State Street Investment Management, one of the world’s largest asset managers.

Frequently Asked Questions (FAQs)

1. Can I fund both a 401(k) and an IRA with my bonus?

Yes! You can split your bonus between accounts as long as you stay within contribution limits.

2. What are 401(k) catch-up contributions?

If you’re 50 or older, you can contribute the extra catch-up amount ($7,500 in 2025, $8,000 in 2026) to your 401(k). Using your bonus can help you reach this limit.

3. Is it better to fund a Roth or a Traditional IRA?

Traditional IRAs reduce taxable income now, while Roth IRAs provide tax-free withdrawals later. Choose based on your current vs. expected future tax bracket.

4. Does a small contribution make a difference?

Absolutely. Even modest additions build momentum, help develop a savings habit, and increase long-term growth.

5. Can I contribute to both a 401(k) and an IRA in the same year?

Yes, you can contribute to both a 401(k) and an IRA in the same year. However, if you (or your spouse) participate in a workplace retirement plan, your ability to deduct Traditional IRA contributions may be limited based on your income. Roth IRA contributions also have income limits, but you can still contribute if you’re eligible.

Your investment can go down as well as up. This post, and any associated customer testimonial or third party endorsement, is provided solely for informational and educational purposes, should not be taken as tax, legal, financial or investment advice and is not an offer, solicitation, or recommendation to buy or sell any securities or investments.

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