How Much of My Bonus Should I Put in My 401(k)?

You can put as much of your bonus into your 401(k) as your plan allows, up to 100%, as long as your total deferrals for the year stay within the IRS limit of $24,500 for 2026 (higher if you qualify for catch-up contributions).¹ The right percentage depends on three things: how much room you have left under that annual cap, whether your employer matches on bonus pay (and trues up the match if you hit the limit early), and whether you want the tax break now or tax-free withdrawals in retirement.

Start With Your Remaining Contribution Room

Pull your most recent pay stub and find your year-to-date 401(k) contributions. Subtract that from $24,500 (or $32,500 if you’re 50 or older by year-end, or $35,750 if you’re 60 through 63).¹² That difference is your ceiling.

Then subtract what you’ll still contribute from your remaining regular paychecks. If you’ve contributed $16,000 so far, your limit is $24,500, and you have four paychecks left at $500 each, your bonus can absorb roughly $6,500 before you hit the cap. Setting your bonus deferral to a percentage that lands under that number keeps you clear.

Most plan administrators will automatically stop deferrals once you reach the plan’s cap. If you’ve worked more than one job this year, no single administrator sees the combined total, and staying within the annual limit is your responsibility.³

Check How Your Employer Match Works on Bonuses

Two plan features can shift the math before you set a percentage.

First, does the match apply to bonus pay at all? Some plans count all compensation (salary, bonus, commissions) when calculating the match. Others match only on base salary. Your Summary Plan Description says which, and HR can confirm. If bonuses aren’t matched, deferring from the bonus still moves you toward the annual limit but doesn’t generate extra employer dollars.

Second, does your plan offer a true-up? If you front-load a big bonus contribution and hit $24,500 in July, your per-paycheck deferrals stop, and so does the per-paycheck match on every remaining paycheck. A true-up provision recalculates the match at year-end based on your full annual pay and deposits the shortfall, usually in the first quarter of the next year. Without a true-up, front-loading can cost you thousands in forgone match. Ask HR before you decide.

One outer boundary: the IRS caps the compensation a plan can consider at $360,000 for 2026, so if your salary plus bonus exceeds that, matching stops at the cap.⁴

Traditional or Roth for the Bonus Dollars

If your plan offers both, the choice comes down to when you want to pay tax on the money.

A traditional (pre-tax) deferral pulls the contribution out before federal income tax withholding, so a bonus you’d otherwise see taxed at the 22% supplemental rate lands in the account intact. You pay income tax later when you withdraw it in retirement.⁵ Social Security and Medicare tax still comes out of the full gross bonus either way.⁶

A Roth 401(k) contribution goes in after tax. Nothing comes off your current-year tax bill, but qualified withdrawals in retirement (including all earnings) are tax-free.⁷⁸

A rough guide: if this is a peak earning year and you expect a lower tax rate in retirement, traditional captures the bigger break now. If you expect your tax rate to be higher later, Roth locks in today’s rate. Either way, both count against the same $24,500 combined limit, not separate ones.¹

Situations That Change the Answer

You’re a Highly Compensated Employee

If you earned more than $160,000 from your employer in the prior year, you’re a highly compensated employee (HCE) for 2026.⁹ Your plan has to pass nondiscrimination testing that compares HCE deferral rates to everyone else’s, and if the gap is too wide, the plan returns excess contributions to affected HCEs.¹⁰ The practical result: your effective ceiling may be lower than $24,500, regardless of what your bonus can absorb. Ask HR whether the plan uses a safe harbor design (which avoids this) or whether HCE deferrals have been capped in past years.

You’ve Already Maxed Out

If you’ve already hit the $24,500 elective deferral limit and want to steer more of the bonus into the plan, some employers permit after-tax contributions. These are separate from pre-tax and Roth deferrals and count toward the $72,000 total annual additions cap under Section 415(c) rather than the $24,500 cap.¹ Many plans don’t offer this feature, so confirm before assuming it’s available.

You’ve Worked More Than One Job This Year

The $24,500 limit is yours, not each employer’s. Contributions across every 401(k) you’ve participated in this year add up against a single cap.³ Pull the year-to-date figure from your prior job’s final pay stub or W-2 before you set the bonus deferral.

Making the Election

Most employers need your election submitted at least one to two pay periods before the bonus is processed. Wait until the week of the payout and the bonus usually runs under your existing settings.

You’ll generally change the rate through your employer’s benefits portal. Some plans let you set a separate deferral percentage for supplemental pay, so your regular paycheck rate stays put. Others require you to change your overall rate and switch it back afterward. A few still use paper salary reduction agreement forms.

After the bonus hits, check the pay stub. Confirm the deferral amount matches what you elected, and if it doesn’t, contact your plan administrator right away. Fixes are easier before the tax year closes.

If You Contribute Too Much

Excess deferrals happen, especially with mid-year job changes or miscalculated bonus contributions. You have until April 15 of the following year to withdraw the excess (and its earnings) from the plan.¹¹ Notify the administrator as soon as you spot the overage; they’ll process the corrective distribution. The earnings portion is taxable in the year you receive it, but the excess deferral itself is only taxed once as long as it’s returned by the deadline.

Miss April 15 and the excess is taxed twice: once for the year you contributed it, and again when you eventually withdraw it from the plan.¹²

1
Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits
2
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
3
Internal Revenue Service. How Much Salary Can You Defer if You’re Eligible for More Than One Retirement Plan
4
Internal Revenue Service. Notice 2025-67, 2026 Amounts Relating to Retirement Plans and IRAs
5
Internal Revenue Service. 401(k) Resource Guide Plan Participants – 401(k) Plan Overview
6
Internal Revenue Service. Retirement Plan FAQs Regarding Contributions
7
Internal Revenue Service. Roth Account in Your Retirement Plan
8
Internal Revenue Service. Retirement Topics – Designated Roth Account
9
Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions
10
Internal Revenue Service. 401(k) Plan Fix-It Guide – The Plan Failed the 401(k) ADP and ACP Nondiscrimination Tests
11
Internal Revenue Service. Retirement Topics – What Happens When an Employee Has Elective Deferrals in Excess of the Limits
12
Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan