06 Dec Can I use my lottery winnings as a 401(k) contribution?

Q. I won a $10,000 lottery and I want to save the money for retirement. I have a 401(k) but I only save enough to get the match, so I’m way under the annual limit. Is there a way for me to use the lottery money as a 401(k) contribution? I’ve already fully funded my IRA for this year otherwise I would consider that.
— Winner-chicken-dinner

A. Congrats on the win.

You have several options for savings.

You can increase your 401(k) contributions from your paycheck, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

“Every payday, you can replace the 401(k) contribution by taking some of your lottery winnings and transfer them to your checkbook,” Kiely said.

If there’s not enough time in the year left to save as much as you want, you could always set the rest aside to fund an IRA next year, or to increase your 401(k) contributions for a bit.

One warning, though.

“Make sure you keep enough funds to pay the income taxes that will be due on your lottery winnings,” Kiely said.

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This story was originally published in December 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.