This cash out calculator can be used to estimate the gain or loss when cashing out a retirement plan such as a 401k or 403b account. The calculator inputs consist of the retirement account balance, age of participant, income tax brackets, and the projected return on investment. The calculator's output includes the value of keeping the account versus cashing out.
Calculator Definitions
The variables used in our online calculator are defined in detail below, including how to interpret the results.
Retirement Account Balance ($)
This is the current value of the retirement account to be cashed out. This can be a 401k, 403b, or any other tax-deferred retirement plan.
Current Age (Years)
This is your current age, stated in years.
Target Retirement Age (Years)
Your current plans include retiring at this age.
Federal Income Tax Bracket (%)
This is your incremental federal income tax bracket, also referred to as a marginal tax bracket.
State Income Tax Bracket (%)
This is your incremental state income tax bracket, also referred to as a marginal tax bracket. If you live in a state that does not have an income tax, then enter zero.
Return on Investments (%)
The return on investments is the average annual rate of return you would expect to realize for this retirement plan if you did not cash out.
Expected Rate of Inflation (%)
This is the expected rate of inflation between now and your retirement age. This value is used later to correct the Keep It Option for the impact of inflation.
Balance at Retirement ($)
This is the total retirement account balance at the Target Retirement Age, compounding the growth of the initial account balance by the Expected Return on Investment.
Federal and State Income Taxes ($)
These are the calculated state and federal income taxes due on the money in the account. This value is calculated using the account balance and the marginal income tax rates or brackets.
Inflation ($)
Since the Balance at Retirement for the Keep It Option is stated in future dollars, the purchasing power of that money needs to be reduced by the Expected Rate of Inflation.
Federal Tax Penalty ($)
Early withdrawals from a tax-deferred retirement account, such as a 401k and 403b plan, incur a 10% federal income tax penalty.
Present Value of Keep It Option ($)
This is the value of the Keep It Option, which takes the Balance at Retirement and adjusts for Federal and State Income Taxes as well as the Expected Rate of Inflation.
Present Value of Cash Out Option ($)
This is the value of the Cash Out Option, which takes the Present Value of the Account and adjusts for Federal and State Income Taxes as well as the 10% Federal Tax Penalty.
Gain or (Loss) by Cashing Out ($)
Subtracting the Present Value of the Keep It Option from the Present Value of the Cash Out Option, allows the user to understand the impact of cashing out their retirement plan. A positive outcome, or gain, is indicated when the value in this cell is positive. A negative outcome, or loss, is indicated when this cell is negative (in parentheses).
Cash Out Calculator
Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.
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