Vesting and Your k

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 accounts 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 employers contribution is part of the plan. This schedule ties in a non-forfeitable percentage to the employers 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 employers 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 employers 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.






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