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Ask Dave

Sell back PTO?

Ashley is thinking about selling her company back a portion of the paid time off she has accumulated over the years, because she wants to use the money to pay off her house more quickly. She talks the plan over with Dave and Chris Brown, and they give her guidance in an unusual situation.

QUESTION: Ashley from Memphis makes about $73,000, and she has reached the cap for paid time off accrual at the company she’s been with for over a decade. She’s also about to begin Baby Step 6 and pay off her home as quickly as possible. She asks Dave and his guest Chris Brown if there’s a reason she should not sell back to her company some of her 10 weeks of paid time off, two weeks at a time, to get traction on paying off the house. Dave learns she’ll get 100 percent on the PTO, and, as a result, the company will suspend accrual of PTO for six weeks regardless. Dave and Chris tell her to go for it.

ANSWER: I’d probably do four weeks at a time. If I understand you correctly, if you don’t do this you’re not going to get PTO for the next six weeks, and if you do it you’re not going to get PTO for the next six weeks. I don’t really hear a downside. Even if it happened to throw you into another tax bracket I wouldn’t really care, because none of the tax brackets are 100 percent. It’s your current tax bracket. Chris, what do you think?

Chris: I think it’s a no-brainer. If someone were to come up to you and say they wanted to give you three percent on that 10 weeks, you’d say yes, right? Well, when you apply it to your mortgage that’s what you’re doing. You’re going to get three percent on that money instead of it just sitting there.

Dave: I’d do it in a little bigger chunks, just because you’re going to start the six-week accrual over every time you do it. So, I’d go ahead and do four and that way it takes a little longer before you have to take a six-week hit.



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