2024 General Motors Profit Sharing
It's that time of year again when most General Motors employees will be eligible to receive their annual profit-sharing check on February 23rd. This year, approximately 45,000 U.S. hourly workers will receive up to $12,250 in profit-sharing. This is a major annual event that occurs for most General Motors employees.
We last wrote about The Big Three when approaching a strike in the fall of 2023. The most significant change in that contract is attributed to the raises that many received. The principles below certainly apply to an increase in income; they are not just reserved for one-time lump-sum payments such as profit sharing.
If you are looking for ways to maximize this benefit beyond its fullest potential, here are a few tips:
1. Build your emergency fund. A general rule of thumb is to have enough money to cover 3-6 months worth of expenses if you do not have children. For those with children, having enough money to cover 6-12 months' in cash is recommended. If you are low on cash, now is a good time to build those reserves for unexpected emergencies.
2. Pay off debt. A lump sum of cash is a great opportunity to take care of some of that outstanding debt. Paying down debt is always good, but knowing what to pay is key. It is best to start by paying down the debt that is carrying the highest interest rate and work your way down the list. It is even better if you can pay some debt off completely. Getting your debts under control will free up future cash flow.
3. Invest it. Investing is recommended for those who have financially put themselves in a great position. If you have already built an emergency fund and your debts have already been addressed, saving the annual profit-sharing check would be a wise decision. Take advantage of Roth IRA contributions or after-tax investing. Both of these are excellent choices and will ultimately make your dollar go further.
4. Have some fun. One thing that we know is that those working in the manufacturing industry are working hard! Depending on your situation, it may be $100 that you take from your profit sharing to make a small luxury purchase or half of your profit sharing check. We certainly encourage you to examine the amount of “have fun” money you use based on your goals and your situation. However, we can all agree that we all deserve to have a little fun!
Bonus Tip: Should I adjust my tax withholdings on my profit-sharing check?
During the 2024 contract negotiations, there were conversations about paychecks that include large bonuses having taxes automatically annualized. If this is the case, then there is no need to adjust tax withholding. However, this is new, and there is not a lot of concrete information regarding how they are going to handle this. Therefore, adjusting your tax withholding may be something employees want to proactively do. When paying out a large bonus or profit-sharing all on one check, the automatic calculations amortize the amount you are paid for during the period listed on the paycheck. Therefore, the tax withholdings will act as if you received a pay increase of over $600,000 annually rather than the $12,250 annual increase in earnings. In addition, by reducing the withholding on this one check, you avoid giving the IRS an interest-free loan until next year's tax return comes. However, if you find yourself owing every year, you might save yourself a future headache by leaving your tax withholdings as is.
While this is not a definitive list of options available, it certainly will point you in the right direction to making solid financial decisions. Of course, everyone’s situation is different, so it is best to consult a professional to discuss your particular situation.
Written by: Brittany Culver
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