Christopher Carosa, CTFA, is chief contributing editor for, a leading provider of essential news and information, blunt commentary and practical examples for ERISA/401(k) fiduciaries, individual trustees and professional fiduciaries.

Clark Griswold actually had it all figured out. Sort of. He figured wrong, but not in the way you think. When he assumed he’d get a Christmas bonus based on previous years, most people think his mistake was to spend it on a swimming pool before he actually received it. Much to his chagrin, despite receiving “the gift that keeps on giving,” that jelly-of-the-month club subscription couldn’t pay for the pool.

But Clark’s real mistake wasn’t buying a pool before he received his Christmas bonus; it was thinking he should use his Christmas bonus to buy something. There’s a better use for that money, just like there’s a better use for any cash you receive as gifts throughout the year. But let’s limit ourselves to year-end bonuses.

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Many people plan to use year-end bonuses to pay off holiday bills when they come due in January. What if, instead, they contributed half of that bonus to their retirement plan? What would the numbers show us?

Let’s say a person earning $50,000 a year saves 10 percent a year, between their contribution and the employer match. If savings begins at age 30, and the salary and retirement savings remain steady until retirement at age 70, then, with an 8 percent annual growth rate, that person will have accumulated $1.46 million at retirement. That amount will replace the $50,000 annual salary by earning 3.45 percent a year.

What if this person earns a 10 percent year-end bonus every year and puts half of that into their retirement plan, rather than buying that swimming pool? Saving this extra 5 percent every year will generate $2.16 million upon retirement at age 70, which only needs to earn 2.35 percent a year to replace the $50,000 salary.

Some companies are more generous at year end and give a bonus equal to 20 percent of the employee’s salary. Putting away half of that each year on top of the regular retirement savings will grow to $2.86 million at retirement. At that amount, a 1.75 percent growth will yield the $50,000 necessary to duplicate the original salary.

The beauty in placing a significant portion of the annual bonus into retirement is employees won’t miss it. They’ve existed the whole year on their normal earnings. This extra money is exactly that—extra. It could be used to pay for a one-time expense like a swimming pool, or it could be put to better use that will pay dividends (literally) during retirement.

And they don’t have to wait for that year-end bonus to put some extra money into a retirement savings plan. While it’s easier to contribute with extra earnings, if they haven’t maxed out their contributions, they can use gift cash (or other “found” money) as a proxy to contribute to retirement savings. To do this, increase the salary deferral—at least temporarily—and use this new gift money as a substitute for what that now-deferred portion of their salary would have been used for.

Implementing this strategy will truly make a Christmas bonus a “gift that keeps on giving.”