economy
My 401(k) fully vests this month—why my latest work anniversary is worth thousands
Many companies contribute to employee retirement accounts, but depending on your firm's rules you may forfeit some or all of it if you leave.
TL;DR
- Company contributions to 401(k) accounts (matches) are often conditional and not fully owned by the employee until a vesting period is met.
- Vesting schedules determine when employer contributions become the employee's property, with common models being cliff vesting (full vesting after a set period) and graded vesting (gradual vesting over time).
- Employees' own contributions to their 401(k) are always theirs immediately, but employer contributions are subject to vesting rules.
- Understanding your specific vesting schedule is essential for making informed career decisions, as leaving a job prematurely can lead to forfeiting thousands of dollars.
- Financial planners generally recommend contributing enough to receive the full company match, as it represents a high rate of return, regardless of the vesting schedule.
- To determine vested amounts, check your plan website for a breakdown of your account by contribution source or calculate it manually.
- When considering a new job offer, compare the total compensation, including the new company's 401(k) match and vesting terms, against any potential forfeiture from your current plan.