Best way to invest one extra month of salary?

[2microsNH]

I'm an academic and just won a grant that includes one month of salary ($5100) each year in 2018 and 2019. I don't want or need to spend the extra money on stuff; rather, I plan to use the money to build my retirement portfolio. I see two options:

1. Roll the money into my monthly paycheck for 12 months, and increase my monthly pre-tax 403(b) contribution by the amount of the grant overage; or
2. Take the money in one lump sum in January each year, and use it to open an annuity or some other retirement account in addition to my 403(b) and Roth IRA.

One important detail: I'm currently not maximizing my monthly pre-tax 403(b) contributions because I can't afford to, but I am maxing my monthly Roth IRA contributions.

Which option will make me more money between now and retirement (~20 years)? Is there a better option I'm not seeing?

[NoStacheOhio]

Lump sum and front load your IRA in January, or hold it in cash for monthly expenses and increase your 403b contributions. Run the tax numbers both way and do whichever makes the most sense.

[Proud Foot]

Take the lump sum and front load your IRA. Without monthly IRA contributions you can bump up your monthly 403(b) contributions without decreasing your net spendable cash.

One important detail: I'm currently not maximizing my monthly pre-tax 403(b) contributions because I can't afford to, but I am maxing my monthly Roth IRA contributions.

Which option will make me more money between now and retirement (~20 years)? Is there a better option I'm not seeing?

Is there a reason you are maxing a Roth IRA but not a pre-tax account like a Traditional IRA or your 403(b)?

[2microsNH]

Great advice everyone -- thanks.

Is there a reason you are maxing a Roth IRA but not a pre-tax account like a Traditional IRA or your 403(b)?

Yes, because I am an investing doofus, and you are very sweet not to say so. Correcting course a.s.a.p.

[SwordGuy]

Check with your payroll department.  Most payroll programs will assume that the lump sum will be paid each and every paycheck after that for the rest of the year.  If yours does that too, they will withhold too much.  You'll get it back the next year, but since the purpose of getting the lump sum in January is to invest it early...

So, find out, and then run the numbers.


Oh - never mind.  You're putting it into a tax advantaged 403b, so they won't take out the taxes.   

I'll leave my prior comment in case someone else gets a bonus and their 401/403/IRA slots are already filled.