Hanna Atala (Kaufman), CFP®

Three ways to put your bonus to work Mar 16, 2026 7:30:00 AM Here's how to work with your urge to splurge, while still moving your money goals forward. Key takeaways Bonuses can help you take a big leap forward with your money goals. But if a spending spree sounds tempting, consider splitting your bonus 50/50 between “present-day” you and “future” you. Saving your bonus via a 401(k) and/or IRA can unlock special tax advantages. Stashing it in a high-yield cash account can help build your emergency fund or save for a near-term goal. Year-end bonuses are a blessing. And while there’s no guarantee you’ll get one—just ask Clark Griswold—if you do, they can have the power to supercharge your savings goals. So while you wait for that bonus cash, read up on three ways to handle small cash windfalls such as these. Go 50/50: Treat yourself now and save for the future Let’s address the elephant in the room: A lot of us spend the bulk of our bonuses. But there’s a psychological workaround to this temptation: Think of yourself as two people. There’s “present-day” you, flush with cash and eyeing a few items on your wish list. Then there’s “future” you and all of their dreams for major purchases or financial freedom. Since both of you can rightly lay claim to your bonus, the only fair thing to do is split it 50-50. So go ahead: Splurge guilt-free with one half of your bonus, and save the other half. Tax-savvy saving: Use your bonus to get a tax break A lot of companies withhold taxes on bonuses at the IRS-recommended rate of 22%. Less commonly, some companies lump it in with your regular paycheck, and your regular withholding rate applies. Either way, and contrary to popular belief, bonuses aren’t taxed at a higher rate. But seeing your bonus shrink due to any amount of taxes is still rough. Thankfully, you may able to minimize your tax hit with the help of a tax-advantaged retirement account: Boost your 401(k) contributions. In some cases, companies allow employees to make 401(k) contributions with their bonuses. If that’s the case for you, consider funneling “future” you’s half of your bonus into your traditional or Roth 401(k), up to the IRS limits. Traditional for a tax break now, Roth for a tax break later. Max out your IRA. Depending on how much income you make, you may be eligible to take advantage of the tax perks of a traditional or Roth IRA. Better yet, you have until Tax Day of 2026 to max out your 2025 IRA! Stash the cash: Start earning interest today Tax breaks aren’t the end-all, be-all, of course. In some scenarios, saving your bonus in a high-yield cash account like our Cash Reserve account might take priority. If you lack an emergency fund, for example, or if you’re planning for a major purchase in the near future. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more. However you save or invest your bonus, rest easy knowing you’re striking a good balance between today and tomorrow. Unless your bonus came in the form of jelly, in which case you’re on your own, Clark.

Save more, sweat less with recurring deposits Jan 28, 2026 5:00:00 AM How one click—and the power of dollar cost averaging—can boost your returns Healthy habits like exercising, eating well, and saving are hard for a reason. They take effort, and the results aren’t always immediate. Except in the case of saving, there’s a simple hack that lowers the amount of willpower needed: setting up recurring deposits. So kick off those running shoes, because you barely have to lift a finger to start regularly putting money into the market. $2, $200, it doesn’t matter. This one deposit setting, along with a little help from something called dollar cost averaging, can lead to better returns. Our own data shows it: Betterment customers using recurring deposits earned ~4% higher annual returns. Based on Betterment’s internal calculations for the Core portfolio over 5 years. Users in the “auto-deposit on” groups earned an additional 0.6% over the last year and 1.6% annualized over 10 years. See more in disclosures. Three big reasons they fared better than those who rarely used recurring deposits include: When you set something to happen automatically, it usually happens. It's relatively easy to skip a workout or language lesson. All you need to do is … nothing. But the beauty of recurring deposits is it takes more energy to stop your saving streak than sustain it. When you regularly invest a fixed amount of money, you're doing something called dollar cost averaging, or DCA. DCA is a sneaky smart investment strategy, because you end up buying more shares when prices are low and fewer shares when prices are high. A steady drip of deposits helps keep your portfolio balanced more cost-effectively. Instead of selling overweighted assets and triggering capital gains taxes, we use recurring deposits to regularly buy the assets needed to bring your portfolio back into balance. Now it’s time for an important caveat: The benefits of dollar cost averaging don't apply if you have a chunk of money lying around that’s ripe for investing. In this scenario, slowly depositing those dollars can actually cost you, and making a lump sum deposit may very well be in your best interest. But here’s the good news: While DCA and lump sum investing are often presented in either/or terms, you can do both! In fact, many super savers do. You can budget recurring deposits into your week-to-week finances—try scheduling them a day after your paycheck arrives so you’re less likely to spend the money. Then when you find yourself with more cash than you need on hand, be it a bonus or otherwise, you can invest that lump sum. Do both, and you may like what you see when you look at your returns down the road.

Traditional vs. Roth: Should you take your tax break now, or later? Sep 23, 2025 12:15:12 PM Picking up where the standard guidance leaves off There can be endless decisions to make when investing. Chief among them: Whether to save for retirement through a traditional IRA and/or 401(k), or the Roth variety. With traditional accounts, you typically invest with pre-tax money, then pay taxes on withdrawals later in retirement. This lowers your taxes today and frees up more money to invest. With Roth accounts, you contribute money that's already been taxed, then enjoy tax-free withdrawals once you turn 59½, with no required minimum distributions. When it comes to which is better, here’s the advice you’ll often hear: Traditionals make more sense if your current tax bracket is higher than where you expect it to be in retirement. And vice versa with Roths. It's a start, but not always helpful in practice. Tax brackets can be confusing, for one, and nobody knows what they'll look like decades from now. People's incomes also ebb and flow with age, as do their tax brackets. Luckily, data from the U.S. Bureau of Labor Statistics can help us eyeball these shifts and plot out when each account type tends to shine brightest. The upward and downward slopes of spending When we look at American's average spending by age, we see it often peaks in middle age and declines as we approach our traditional retirement years. Connecting the dots, this means that traditional contributions often make more sense during the middle portion of workers’ careers. They’re likely earning and paying more in taxes than they will in retirement, so it makes sense to shift some of that tax obligation to a lower bracket down the road. For those with lower incomes, pairing those tax-deductible deposits with the standard deduction can also help squeeze more of their taxable income into the 12% tax bracket. The next bracket takes a big step up to 22%. As one’s income rises, however, another wrinkle may come into play. The IRA income limit exception If your income grows to a certain point (see the table below), you’ll face one of those so-called “champagne problems”: the tax deductions of a traditional IRA will begin to phase out, meaning it’s Roth or nothing if you want at least a partial tax break. Earn even more, and your Roth access will eventually dry up too, although there’s a handy “backdoor” option that’s worth checking out. A 401(k), as a side note, has no income restrictions for either contribution type. 2026 IRA income limits Traditional IRA* Modified Adjusted Gross Income (MAGI) Roth IRA Modified Adjusted Gross Income (MAGI) Full tax deduction $0-$81,000 (single filers) Full contribution $0-$153,000 (single filers) $0-$129,000 (married filing jointly) $0-$241,999 (married filing jointly) Partial tax deduction $81,001-$90,999 (single filers) Partial contribution $153,001-$167,999 (single filers) $129,001-$148,999 (married filing jointly) $242,000-$251,999 (married filing jointly) No tax deduction** $91,000 and up (single filers) No contribution $168,000 and up (single filers) $149,000 and up (married filing jointly) $252,000 and up (married filing jointly) *If covered by a retirement plan at work **Anyone is eligible to make non-deductible contributions to a traditional IRA See the income limits for more tax filing statuses Source: IRS This is why blanket statements like “Roths are better” don’t hold much water. The decision boils down to your personal income situation, and that’s subject to change. With Betterment, however, our Forecaster tool does much of the work for you. Simply scroll down to its “How to save” section, and we’ll use your self-reported financial information to suggest not only the optimal order of retirement account types, but whether traditional or Roth contributions make more sense based on your projected future tax bracket. Just be sure to update your info as needed (raises, marital status, etc.) for the most accurate estimates. Now or later? Now that’s one less call to make The traditional vs Roth debate will likely rage on for years. But between content like this, and tools like Forecaster, we do our best to help you quickly clear this common investing hurdle. If your income is trending anything like the averages above, traditional deposits may make more sense, but the advantage will be slight, and it never hurts to hedge. Having both Roth and traditional funds gives you more flexibility when managing your income in retirement. Plus, you can spend less time stressing over the two, and more time building momentum toward your goal. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more.