Do you have a 401(k) retirement account? Are you vested yet? Before you
move on to your next job, it is critical for you to find out if you are
fully vested in your retirement account before you make the move. If
you are not, you could lose hundreds if not thousands of dollars in
employer contributions.
Vesting refers simply to the non-forfeitable percentage of your
account’s assets. In other words, whatever you contribute to your
401(k) plan is always yours to keep including any rollover money.
If your employer contributes to your plan, a vesting schedule for the
employer’s contribution is part of the plan. This schedule ties in a
non-forfeitable percentage to the employer’s contribution for each year
of service until you are fully vested – 100% – in the employer
contribution.
Vesting schedules vary with the employer. A sample schedule could
include you being fully vested after three years of service. After year
one the schedule may have you one third vested; after year two you
could be two thirds invested; finally upon your third anniversary you
would have full entitlement to your employer’s contributions, thus you
would be 100% vested.
In all cases, upon leaving a company your contribution and any rollover
funds are yours to keep. However, depending on your employer’s vesting
schedule only a percentage of the funds contributed by your employer
may actually be yours to keep. If you leave before you are fully
vested, you stand to lose a significant amount of money. Thus, it
behooves you to calculate whether the financial benefits of the new job
outweigh any potential loss of employer contributions to your 401(k)
account.
