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The schedule that determines when employer-contributed money in a retirement plan actually becomes yours to keep.
Why It Matters
Employer matching contributions are frequently described as money you simply receive, but vesting is the condition attached. Under a cliff schedule you keep nothing until a set date and then all of it; under a graded schedule ownership builds in steps. Leaving before you are fully vested means forfeiting the unvested portion. Your own contributions are always yours immediately — vesting applies only to the employer side.
Key Points
- Applies to employer contributions; your own contributions are always 100% yours.
- Cliff vesting: nothing, then everything on a set date. Graded: ownership builds in steps.
- Leaving before fully vested forfeits the unvested employer money.
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401(k) Explained
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Related Terms
Common Questions
The schedule that determines when employer-contributed money in a retirement plan actually becomes yours to keep. Employer matching contributions are frequently described as money you simply receive, but vesting is the condition attached. Under a cliff schedule you keep nothing until a set date and then all of it; under a graded schedule ownership builds in steps.
Employer matching contributions are frequently described as money you simply receive, but vesting is the condition attached. Under a cliff schedule you keep nothing until a set date and then all of it; under a graded schedule ownership builds in steps. Leaving before you are fully vested means forfeiting the unvested portion. Your own contributions are always yours immediately — vesting applies only to the employer side.
Applies to employer contributions; your own contributions are always 100% yours.
Cliff vesting: nothing, then everything on a set date. Graded: ownership builds in steps.
Leaving before fully vested forfeits the unvested employer money.