π° Essential Financial Decision: Our FREE PTO vs 401(k) Calculator 2026 determines whether cashing out unused PTO or contributing to 401(k) gives better tax savings and future value. Used by thousands of US employees for tax optimization, retirement planning, and financial compliance. Calculate your optimal choice based on 2026 IRS tax brackets and investment returns.
Discover whether to cash out PTO or contribute to 401(k) for optimal tax savings
The PTO vs 401(k) calculator uses IRS 2026 tax brackets and compound growth formulas to determine the financially optimal choice. Unlike basic free PTO calculators, our system accounts for federal taxes, state taxes, FICA, employer matching, and investment growth over time.
PTO Cash-Out Value: Net = Gross PTO Value Γ (1 - Federal Tax - State Tax - FICA - SDI)
401(k) Future Value: FV = Contribution Γ (1 + Match%) Γ (1 + Return)^Years
Tax Savings Immediate: Savings = Contribution Γ (Federal Tax + State Tax)
Compound Growth: A = P Γ (1 + r/n)^(nt) where n=1 (annual compounding)
Net Benefit Comparison: Ξ = FV_401k - Net_Cash Γ (1 + After-Tax Return)^Years
Break-Even Analysis: Years_BE = ln[(Net_Cash Γ (1 + r_after_tax)) / (Contribution Γ (1 + Match))] Γ· ln(1 + r_pretax)
Formulas updated with 2026 IRS Publication 15-B and SECURE 2.0 Act provisions
Tax Complexity: This PTO vs 401(k) calculator provides estimates. Actual tax implications depend on your complete financial situation, deductions, credits, and other income. Consult with a tax professional for personalized advice.
401(k) Withdrawal Rules: Early withdrawals before age 59Β½ incur 10% penalty plus taxes. 401(k) funds are less liquid than cash. Consider your need for emergency funds.
Company Policy Variations: Some companies don't allow PTO cash-out. Others limit 401(k) contributions from PTO. Verify your company's specific policies.
Our PTO vs 401(k) calculator 2026 provides estimates with approximately 90-95% accuracy for standard W-2 employees based on 2026 IRS tax tables. However, individual situations with multiple income sources, deductions, credits, or tax-advantaged accounts may vary. The tool accounts for federal tax, state tax, FICA, and employer match but doesn't account for AMT, phase-outs, or other complex tax situations.
Most companies don't allow direct PTO-to-401(k) transfers. Instead: 1) Cash out PTO, 2) Increase your regular 401(k) contribution percentage temporarily, 3) Use the cash to cover living expenses while more paycheck goes to 401(k). This achieves the same financial result. Our calculator accounts for this indirect method in its recommendations.
Employer match is free money that significantly favors 401(k) contributions. A 50% match means every $1,000 of PTO contributed becomes $1,500 in your 401(k) immediately. This 50% instant return typically outweighs tax savings from cash-out, especially with compound growth over years. Always max out employer match first before considering PTO cash-out.
Traditional 401(k): Contributions reduce taxable income now, taxes paid on withdrawal. Favored when current tax rate > expected retirement tax rate. Roth 401(k): Contributions made with after-tax dollars, growth and withdrawals tax-free. Favored when current tax rate < expected retirement tax rate or for tax diversification. Our calculator includes Roth 401(k) option.
State taxes significantly impact the calculation. In high-tax states (CA 13.3%, NY 8.82%), 401(k) deferral saves more taxes. In no-tax states (TX, FL, TN), cash-out loses less to taxes. Some states (CA, NY, NJ) also have disability insurance taxes on PTO cash-out. Our calculator includes all 50 state tax rates updated for 2026.
Thousands use our calculator for tax optimization and retirement planning
Educational Purpose Only: This PTO vs 401(k) calculator 2026 is for educational and informational purposes only. It is not financial advice, tax advice, or a substitute for professional consultation.
Tax Accuracy: Tax calculations are estimates based on 2026 IRS publications. Actual tax liability depends on your complete financial situation, deductions, credits, and other factors.
Investment Risk: 401(k) returns are not guaranteed. Past performance doesn't guarantee future results. Market fluctuations can affect actual returns.
Company Policy: Verify your company's specific policies regarding PTO cash-out and 401(k) contributions. Not all options may be available.
Professional Advice: For financial, tax, or investment decisions, consult with qualified professionals (CFP, CPA, financial advisor).
Last Update: January 1, 2026 | Next Review: July 1, 2026