Even though about 75% of financial professionals say workers should invest bonuses in their 401(k) plans, only 17% of employees do so, according to a recent survey by Empower. 

Nonetheless, bonus amounts vary widely. When asked how much they received in bonus payments, 36% of respondents said less than $500, Empower reported. Meanwhile, only 5% said they received more than $10,000. And 28% said they earned $1,000 to $5,000

But even a small amount can go a long way, a financial expert said.

"Saving for retirement may seem like a steep mountain to climb, but the climb doesn't have to be as steep as it looks," Fidelity Investments Vice President Ann Dowd said in a statement. "Small steps now can turn into big strides later."

The median household income is about $69,000, according to the latest Census Bureau data, and the average contribution rate to a 401(k) plan was 7%, according to U.S. News and World Report. If a 30-year-old employee contributes $4,830 (7% of $69,000) to a 401(k) plan each year until age 65, they would have accumulated $1.58 million by age 65, assuming an annual investment return of 10%. But if that person were to also invest a $1,000 bonus each year, that employee would have earned $1.9 million by age 65.

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Less than half of employees received nonproduction bonuses as of March 2022, according to Bureau of Labor Statistics (BLS) data. And 69% of private industry workers had access to workplace retirement plans such as a 401(k) as of March 2022, BLS reported.

Still, employees can open various retirement plans outside of work. Some common types are individual retirement accounts (IRAs) and Roth IRAs. 

Traditional IRAs work similarly to traditional 401(k) plans. These allow tax-deductible contributions, which means investing in these plans may reduce an employee’s taxable income. And money in an IRA account grows tax-deferred. This means investors won't need to pay taxes on their contributions or earnings until they’re obligated to take required minimum distributions (RMDs) at age 73.

Roth IRAs don’t offer tax-deductible contributions. But account holders can withdraw money tax-free as long as they’re above age 59.5 and the account has been open for at least five years. And Roth IRAs don’t come with RMD rules.

"A Roth IRA has the benefit of providing tax-free distributions in retirement," Wendy Kelley, U.S. Bank national IRA product manager, said in a post. "And it’s one of the best retirement options if you’re in your 20s or 30s, because of the potential to compound tax-free funds over your working years."

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People should aim to save at least 15% of their pre-tax income for retirement, including any employer matches, according to a Fidelity Investments analysis.

Of course, not everyone can afford to contribute as much. But financial experts recommend people invest as much they can and start investing as soon as possible.

In fact, a person who starts saving now for ten years and then stops would have saved $91,880 after a decade, according to research from Securian Financial. That’s $30,000 more than a person who would have waited 10 years to start and saved for 20 years.

"The single most important thing you can do is start saving early," Fidelity Investments said in its analysis. "The earlier you start, the more time you have for your investments to grow – and recover from the market's inevitable downturns."

"If retirement is decades away, it may be hard to think or care about it," Fidelity continued. "But when you are young is precisely the time to start saving for retirement. Even though it can be a challenge to save for the future, giving your savings those extra years to grow could make the struggle worth it – every little bit you can save helps."

It’s also important to increase contributions, even by as little as 1% a year, Fidelity said. Its analysis found that increasing contributions by 1% of income each year from age 25 to age 67 was found to generate 3% more income in retirement.

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