What does “vesting” mean?

For the last few weeks we’ve been talking about 401(k)s. This week we’re continuing that theme with an explanation of “vesting” and how it might apply to your 401(k).

If your company offers a 401(k) with matching contributions, there’s a good chance that 401(k) plan also includes a vesting provision. A vesting schedule describes how long you must continue working at your company before matching 401(k) contributions are truly yours. If you leave before you are fully vested, some or all of the matching contributions to your 401(k) would be lost. There are different types of vesting (a lot like there are different types of matching) so we have a short breakdown here that outlines the most common options.