Vesting
What is Vesting in regards to your retirement account and why do you need to know it?
What is Vesting in regards to your retirement account and why do you need to know it?
Vesting deals with ownership of matching money provided by the business. Your vesting period will run from 3 to 5 years in many cases based on where you work and how the employer has set up the plan. This means that you need to work at that location for a set period of years to be fully vested in the plan. Vested means you become the owner of the matching money instead of the business. This is important!
The money you put into a retirement plan at work is always yours no matter how long you work there. The matching money becomes yours based on the vesting period and that can be different based on the employer. Some employers provide you a percentage per year (like 20%) rather than an all or nothing approach. You want to fully understand your plan and how your employer does it if matching money is offered.
Let’s say you have a 5 year vesting period. Many employers will provide you vesting at 20% per year. So after 3 years, 60% of the matching money becomes yours and after 5 years, it all becomes yours. Other employers give you all or nothing based on a set period of years like 5 years. Knowing this information should help a person think carefully before moving on to another opportunity. Get vested!