I am scheduled to receive my annual bonus in the next paycheck and have the opportunity to change my retirement account contribution. Should I consider ramping up the contribution in order to lessen the amount that is paid to taxes? I am already paying the ~$800 per paycheck to meet the $19,500 max.

If it’s helpful…
– I live in a state with state income tax
– The bonus amount is around $10k
– I plan to change employers in the next month; the new one does not match contribution until one year of employment

Thank you!

I was about to say “be careful about your match”, but if you’re changing jobs anyway quite soon, go for it on the front-loading. Just remember to adjust whatever you set up with new employer that you get only get $19,500 for the year for all 401Ks combined.
Thank you both. I’ve been trying to wrap my head around the bonus withheld vs tax matter. So I’m clear — either route (frontloading during annual bonus or paying evenly) would result in paying the same amount to taxes at EOY, correct? The consideration that should be made is whether employer match would change in those scenarios?

By that logic, it seems that as long as I contribute enough in the paycheck to max the employer contribution, there isn’t much point in overloading it for when my bonus gets paid (esp because I’m changing employers immediately following the pay cycle).

I think I’ll still do it just for kicks.

I’d just add make sure you can contribute to the new employers plan from day 1. What you’ve shared reads like you can contribute but won’t receive a match for a year, but I’d double check that before forgoing increased withholding at current job.

This content was originally published here.

In this article: