vacation payout vs runout

[grobinski]

So, am preparing to FIRE in 2020 and getting ducks in a row. Was looking at vacation payout as a nice little cash bonus until SO came home with a plan to "run her's out".

What is running out vacation? (I'm sure MMM'ers have a term for this I'm not aware of)

Running out vacation is working through it all rather than taking a cash payout (or similar). If your employer allows it, by running out your vacation you can: earn vacation as you use it, get more employer retirement contributions, extend employer health care contributions and coverage.

In my case I am on payroll until Feb3rd and taking vacation Jan 3-31. Total gains for showing up at work on Feb 3rd are ~$2000 more than taking the payout would have been. Since this is happening at the beginning of the calendar year I am going to put 100% of my earnings in my 457 so will have nearly zero taxable income from it.

I am certainly fortunate that I have 180 hours of vacation to do this and more fortunate that my employer is permitting it, but if you're in a similar situation it may well be worth pursuing.

So, how badass is this?

[ender]

Not all companies allow this. My previous company had someone retire and take around 9 months of PTO (he was grandfathered into a massive amount of PTO).

I personally use PTO too much to end up having a meaningful amount of PTO.

[Car Jack]

If company policy allows it, that's great.  But some of us don't have the option of payout.  In my company, any vacation time not used by the end of the year is forfeited. 

There are plenty of opportunities to game the system.  When we adopted my first son, my wife took her leave, then I took mine.  I started leave on January 3rd, meaning I was at work on the 2nd, clicking the "he was here" bit in the system to give me vacation days at 1/12 year's worth.  I returned on the last day of March, clicking another 1/12 year's worth.  So even though I was essentially gone for 3 months, I only missed out on earning vacation time for one of those months.  Company policy stated that if I worked for at least one day during the month, I received vacation accrual. 

[Lan Mandragoran]

I personally plan on just having my last year or two being super heavy vacation years so I dont have any significant amount left. It's worth so much more to do it that way rather than take time as a bonus. Health insurance, retirement contributions, random benefits etc can be equal to the actual salary.

[nnls]

my mum is currently doing this, she is taking 51 weeks of paid leave (she is currently on about week 4) and will then retire.

[seattlecyclone]

I ran mine out. As you state, running your vacation out can be more financially beneficial than getting the lump sum payout due to longer time getting benefits, accruing more vacation while you take it, maybe having some paid holidays while you're on vacation, perhaps additional stock-based compensation, etc.

I didn't give notice until after the vacation was done, since I doubted corporate policy would have allowed me to "run it out" after expressing my plan to leave.

[kpd905]

My employer throws a bit of a wrench into the equation, because they do their employer match each year in April, based on your income the previous year.  So if I wanted to stop working in April or May, I could sell ~100 hours of PTO in December to bump up my income in the previous year, getting another 7% match on that amount.  I'd have to look at the tax implications, maybe it would be better to have a little more income in a partial year rather than get this match.