What Does Vesting Mean?

A vesting period refers to the amount of time you must stay with an employer until the employer matching is available. Vesting is a word used in the retirement plan industry to represent ownership of the money in your account. You are always 100% vested in the money you put into your retirement plan, plus or minus any gains or losses. However, employer matching and profit-sharing dollars, if applicable, are often vested over time.  

For example; If your employer offers a 3% match with a 1 year vesting period, and you are contributing at least 3%, you must stay with the company for the full 1 year before the employer's 3% match is considered yours.  

Some vesting schedules may be tiered over a few years.

For example; If your employer has a 5-year tiered vesting schedule, they might vest the employer matching 20% per year of your employment. Let's take a look at the following hypothetical example: If the employee earns $50,000 a year and contributes 3% of their pay, and the employer matches the 3% dollar for dollar. To keep the math simple, we will not assume any income increases, nor will we adjust the balance for any possible market gains or losses. As you can see in the bottom right-hand corner of the chart below, the employee becomes 100% vested after completing 5 years of service.

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For vesting purposes, employment may be tracked from your date of hire or from the year you were hired. More details on whether you have a match and the vesting of that money are available in the documents section of your portal.