Rollover Calculator

Cashing Out Costs More Than the Tax Bill Alone

Leaving a job with an old 401(k) presents a choice: roll the balance into a new tax-advantaged account, or cash it out. Cashing out looks tempting as a lump sum, but it triggers ordinary income tax immediately, plus a 10% early withdrawal penalty if you're under 59½ — and whatever remains after that no longer compounds tax-deferred. This calculator compares both paths over a chosen time horizon so the true cost of cashing out is visible in dollars, not just as a warning.

The Formula

Net Cash Out = Balance − (Balance × Tax Rate) − (Balance × 10% Penalty, if under 59.5)
Cash-Out Future Value = Net Cash Out × (1 + r)^years
Rollover Future Value = Balance × (1 + r)^years

Because the rollover keeps the full balance invested and tax-deferred, its future value formula starts from the entire balance, while the cash-out path starts from a reduced net amount after tax and penalty.

Where This Calculation Matters

Job changes — deciding what to do with an old employer's 401(k) is one of the most common retirement decisions, and the rollover option preserves tax-deferred growth with no immediate tax event.
Avoiding the early withdrawal penalty — the 10% penalty applies specifically to withdrawals before age 59½, on top of ordinary income tax.
Consolidating accounts — rolling into an IRA or a new employer's plan can simplify management without disrupting tax-deferred status.
Weighing short-term cash needs against long-term growth — the future value comparison quantifies exactly what's given up by taking the money now.

Worked Example: $50,000 Balance, Age 45, 22% Tax Rate, 7% Return, 20 Years

Cash-out versus rollover outcome for a $50,000 balance held for 20 years at a 7% annual return
Item	Amount
Income tax owed (22%)	$11,000.00
Early withdrawal penalty (10%, under 59½)	$5,000.00
Net cash out today	$34,000.00
Cash-out path, grown 20 years	$131,569.27
Rollover path, grown 20 years	$193,484.22
Difference in favor of rollover	$61,914.95

The gap widens the longer the money would otherwise stay invested, since the rollover path compounds on the full balance from day one.

How to Use This Calculator

Enter the account balance being considered for rollover.
Enter your current age — this determines whether the 10% early withdrawal penalty applies.
Enter the income tax rate you'd pay if you cashed out.
Enter the annual return rate you expect the money to earn either way.
Enter the number of years until you'd need the money.
Select Calculate to compare the future value of rolling over versus cashing out.

Related Calculations

See how the rolled-over balance could grow long-term with the 401(k) Calculator, or check IRA Contribution limits if rolling into a new IRA.