What Clients Should Do With Their Year-End Bonus: Advisors’ Advice

As 2023 draws to a close, some clients will be looking forward to receiving a year-end bonus, while others may be asking themselves if their organization’s 2023 performance (or their own) warrants financial recognition.

New survey data published by Challenger, Gray & Christmas, the career research and consulting firm, suggests that holiday payouts won’t be as common this December as an uncertain 2024 looms. According to the survey, 34% of employers will not give out any bonuses this year, up from 27% in 2022.

That is the highest number of companies to announce lower payouts since 2019, according to the firm, when 36% opted not to give bonuses. Also notable, among companies that do plan to give employees year-end rewards, 15% are lowering the value of the bonuses.

Still, even with this anticipated annual drop, many Americans will see a one-time bump in compensation this month — or at some point in 2024 — and they may come to their financial advisors for insight about just what to do with the money.

Is it always better to save or invest the funds? Should one make a big donation or a purchase for the home? What about living a little and planning an unexpected vacation?

Obviously, the circumstances for each client will be different, but advisors responding to an inquiry from ThinkAdvisor all agreed that it is important to weigh the pros and cons of spending or saving the bonus. They offered up a number of other helpful suggestions, from following the “rule of thirds” to going “YOLO.”

See the accompanying gallery for advisors’ advice on the best ways to treat client bonuses in 2023.