What to do with a bonus
For many households a bonus follows the same order as a raise: high-interest debt, an uncaptured match, a thin emergency fund, then the next retirement account. Because it may not repeat, keep it out of the spending you use for a FIRE number.
Arc · Published September 18, 2026 · Updated September 18, 2026
Decide the split before it hits the account
A bonus that lands in checking tends to become spending. Choosing a percentage for cash, debt, and investments the week before is the whole tactic. The percentage is yours. The mistake is having none.
Do not annualize it
A $20,000 bonus is not a $20,000 raise. Savings-rate math can include it in the year it arrives. A retirement date that needs that bonus every year is using income you have not been promised.
Common questions
Should I withhold extra for taxes?
Often yes. Bonus withholding is frequently a flat rate that is not your real marginal rate. A surprise tax bill the next April is just the bonus, delayed.
Keep going
Related reading
What order should I fund investment accounts?
A common order is match, high-interest debt, emergency cash, then tax-advantaged room, then taxable.
Related reading
What is a good savings rate?
A useful savings rate is the one that reaches your spending target on your timeline.
Related reading
Good debt vs. bad debt
The useful split is the interest rate and what the debt bought, not the moral label.
Tools
401(k) match calculator
See the employer match and any match left on the table. The 2026 deferral limit is a labeled default.
Tools
Debt payoff calculator
Compare avalanche and snowball payoff times for a few balances.
Tools
Savings rate calculator
Divide savings by gross or take-home income and see the rate explicitly.
Playbooks
Put a raise to work
A simple split so a raise does not disappear into recurring spending.
Playbooks
Capture your 401(k) match
How to read a match formula and stop leaving compensation unclaimed.
Educational estimate only. Not tax, legal, or investment advice, and not a prediction of what your accounts will do. Methodology