Are you taking a vote?? If so, my vote is to try saving it for a while and see if you miss having it (can you have it automatically deducted to a savings acount??) From experience I can tell you, we very easily "grow" into our current salary, next thing you know you are "trapped" at that salary and it makes for a tough transition should you decide to 'slow down' or'cut back' on the workload. The nice thing is that you can always fall back on what you've saved if need be.
In any case, CONGRATULATIONs on the raise...it always does wonders for our self esteem when we are recognized and rewarded!! (Kudos to you!)
When ever some gets a raise they should make sure that there 401k is coming out based upon a percentage of pay and not a set figure. If there is a set figure your 401k will never reflect the raise, if percent your 401k will always receive a raise too.
Keep living on what you make and the raises will really start to pile up in savings and paying down debt. I have been waiting for a raise of about 15% to come through (stupid hr process, have to rewrite job description for the third time! man I hope this becomes retroactive but academic setting I donít think that will work! Sorry to rant.)
Congrats on the pat on your back that your are successful at work and they want you around.