Near the end of 2017, the President signed into law a tax reform bill that created an opportunity for businesses across the country. As a result, many companies announced that they are providing cash bonuses to employees, payable this quarter. In addition, employees may receive performance-based bonuses or pay increases at this time of year, as many employers are conducting yearly performance reviews.
“While some may see any or all of these as newfound money to spend immediately,” says Rich Guerrini, President & CEO of PNC Investments, there are things to think about for how to use the funds:
Pay Down Debt – During the holidays, people tend to overspend, with much of those purchases being placed on credit cards. In fact, reports are that U.S. year-end holiday retail sales rose 5.5% compared to the same period in 2016
Credit cards can have high interest rates, so to help minimize this, you might consider using the funds to pay down credit card or other debt and start off the New Year in a financially responsible way.
Start an Emergency Fund – A money market account and other appropriate short-term savings vehicles can help provide easy money management and FDIC protection to help you achieve your savings goals. A money market account may be comprised of short-term securities representing high-quality, liquid debt and monetary instruments.
Increase Your 401(k) Contribution – A 401(k) is an employer-sponsored retirement plan that, if your employer offers one and you are eligible to participate, may allow you to invest part of your paycheck before taxes are removed. Many employers will match a portion of your payment to this plan, helping your contribution make even more of an impact on your retirement well-being.
Invest in an Individual Retirement Account (IRA) – An IRA can allow you to invest for retirement on a tax-deferred basis and your contributions may be tax-deductible. The deduction may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels. For 2017 and 2018, your total contributions to all of your traditional and Roth IRAs for the year cannot be more than $5,500 ($6,500 if you are age 50 or older) or, if you made less than that, your taxable compensation for the year. Roth IRA contributions may be limited based on your filing status and income. Note that Roth IRAs are not tax deductible.
Add to Your Child’s 529 Plan – There is no better time than the present to invest in your child’s education and the new tax reform bill expanded the use of 529 plans to cover expenses for grades K through 12. A 529 plan is a tax-advantaged investment designed to encourage saving for the future higher education expenses of your child or beneficiary. There are two types of plans: prepaid tuition plans that allow you to pay for tuition and fees at designated institutions in advance, and savings plans that are tax-advantaged investment vehicles, which allow you to save for future education costs.
“No matter where your unexpected funds are coming from, if you take time to consider the options, you can ensure that you are putting your money to good use – now and for your future,” Guerrini says.
Learn more about retirement planning solutions that can help you reach your goals »
PNC Point of View
Real People. Real Perspective. Real Insights.
Read more POV Stories »
*Source: National Federation of Retailers
These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.
This site may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.
Important Investor Information: Brokerage and insurance products are:
Not FDIC Insured • Not Bank Guaranteed • Not A Deposit
Not Insured By Any Federal Government Agency • May Lose Value
Securities products, brokerage services and managed account advisory services are offered by PNC Investments LLC, a registered broker-dealer and a registered investment adviser and member FINRA, and SIPC. Annuities and other insurance products are offered through PNC Insurance Services, LLC, a licensed insurance agency.
PNC Investments and PNC Insurance Services do not provide legal, tax or accounting advice.
The PNC Financial Services Group, Inc. (“PNC”) uses the marketing name PNC Wealth Management® to provide investment and wealth management, fiduciary services, FDIC-insured banking products and services, and lending of funds through its subsidiary, PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and to provide specific fiduciary and agency services through its subsidiary, PNC Delaware Trust Company or PNC Ohio Trust Company. Securities products, brokerage services, and managed account advisory services are offered by PNC Investments LLC, a registered broker-dealer and a registered investment adviser and member of FINRA and SIPC. Insurance products may be provided through PNC Insurance Services, LLC, a licensed insurance agency affiliate of PNC, or through licensed insurance agencies that are not affiliated with PNC; in either case a licensed insurance affiliate may receive compensation if you choose to purchase insurance through these programs. A decision to purchase insurance will not affect the cost or availability of other products or services from PNC or its affiliates. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC does not provide services in any jurisdiction in which it is not authorized to conduct business. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”). Investment management and related products and services provided to a “municipal entity” or “obligated person” regarding “proceeds of municipal securities” (as such terms are defined in the Act) will be provided by PNC Capital Advisors, LLC, a wholly-owned subsidiary of PNC Bank and SEC registered investment adviser.
“PNC Wealth Management” is a registered trademark of The PNC Financial Services Group, Inc.
Investments: Not FDIC Insured. No Bank Guarantee. May Lose Value.
Insurance: Not FDIC Insured. No Bank or Federal Government Guarantee. Not a Deposit. May Lose Value.
Bank deposit products and services provided by PNC Bank, National Association. Member FDIC.
©2018 The PNC Financial Services Group, Inc. All rights reserved. PNC Bank, National Association. Member FDIC
Read a summary of privacy rights for California residents which outlines the types of information we collect, and how and why we use that information.