Received Annual Bonus

I received my annual bonus last week. Its seems like every year these bonuses get smaller and smaller. Not that I am complaining - some bonus is better than no bonus. What would be even better is if these bonuses were more related to my actual performance.

Here is how my bonus played out:
401k Contribution - 25%
Taxes -- 31%
ESPP -- 10%
Net Received -- 34%
--------------------------------
Gross Bonus ---- 100%

A majority of the cash received will be used to pay my federal and state income taxes. Less than exciting, but will certainly help in my 2007 net worth goal.

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Comments (11)

Just wait until you see next years...I hear they are starting to go the way of the dodo here.

Posted by RS | March 20, 2007 5:05 PM

I remember reading somewhere about the % of companies that still offer annual bonuses ---- it was a small number. I wish I could remember the exact percentage. My company also offers a small bonus around Christmas. Like you said, some bonus is better than no bonus! :)

NetWorth

Posted by NetWorth | March 21, 2007 9:24 AM

You own 2 properties, one is residential and the other is a rental and you are using your bonus to pay your taxes? fed & state?
Dude, dude, dude...........I am speechless.

Posted by boomie | March 21, 2007 2:39 PM

I see ~25% of your bonus went to 401(k). Seeing as you max this out each year, whats your take on 401(k) expenses? Mine is ~0.85% per year, then factor in individual fund expenses (for example, a 0.5% per year S&P index fund). This means that I am guaranteed each year to underperform the market by 1.35%!!!

It seems better all around to put it into a free IRA with Fidelity or Vanguard, and buy their 0.1% S&P fund. Of course the contribution limit is much lower ...

Posted by Jonathan C | March 21, 2007 4:29 PM

Boomie - not sure I follow - It looks like I will owe about $1200 over what was withheld for fed & state taxes -- whats wrong with using the money I received from my bonus to pay this?

Jonathan, my employer's 401k have the lowest expense ratios that I can find compared to any available mututal fund companies -- Im very happy putting what I can into it.

Posted by 2 million | March 21, 2007 6:36 PM

I wish my company would us annual bonuses. All we get is a freakin company t-shirt around christmas time. Maybe I should consider finding a larger company to work for?!?

Posted by Sharpie | March 22, 2007 10:59 AM

2 mill guy: I would think with your witholding, your interest/realestate tax write offs on both your residential and rental, plus rental expenses, rental upkeep repair & maintenance you would NOT owe any tax at the end of the year. Rule of thumb, for every $1200 you owe, witholding should be adjusted. You should claim one less than what you are claiming now. next year you will owe nothing and keep whatever bonus etc. you get. Just my opinion.

Posted by boomie | March 22, 2007 4:54 PM

Yeah I was striving to owe some this year so I reduced my witholding. I already upped it at the beginning of the year since I won't have some of the large one-time deductions (temp assignment) I had this year.

Posted by 2 million | March 23, 2007 11:34 AM

I'm curious why Boomie is so eager to give the government his money for free all year. I try to minimize my withholdings and maximize the amount I owe, without hitting penalties/interest; this year I owe $4,000; next year it will be $14,000. My wife are currently each claiming 12 withholding allowances on our W-4.

Posted by CPA1298 | March 23, 2007 6:39 PM

Hi 2 million,
I just got my annual bonus from my employer (and I am expecting a large tax return as well), and I wondered if you might suggest the best way to spend it. I was thinking putting it toward my auto loan (at about 6.7%) or my mortgage (at about 6%). The other alternative would be to save 100% of it. Any thoughts?

Posted by CJB | February 17, 2009 12:06 PM

CJB,
I try not to give advice, but I don't know any more than the next guy. Between the options you listed I would 1) make sure I am already saving enough for retirement, and then 2) look at paying off the auto loan before the mortgage because its a higher interest rate and the mortgage interest is tax deductible.

Posted by 2million | February 17, 2009 1:00 PM