What you should know about your 401(k) Match: Cliff Vesting

What you should know about your 401(k) Match: Cliff Vesting

June 17, 2021

Congratulations! You just started a new job and you’re going through your benefits package, reading up on your 401(k) and the employer match. For this example, let’s say your company is matching dollar for dollar of your contribution up to a certain percentage.

A year into your new role flies by, you login to check your progress on your retirement plan and happily see that your contribution and company match are invested and growing in the market. But what happens if another opportunity opens up and you decide to leave the firm?

That’s where the fine print of the benefits comes in. Employer matches are usually done one of three ways –

  1. Immediate Vesting
  2. Graded Vesting
  3. Cliff Vesting

You lookup the details and see that your match is vested on a “2 Year Cliff.”  So, what does that mean?

Cliff vesting means that an employee receives the full amount of their benefit, in this case 401(k) match, on a specific date rather than gradually over time. Here, that date is the 2 year anniversary at your place of employment. If you leave before then, you will lose out on your match dollars. With this type of vesting, after the cliff date you are fully vested and would receive the total amount of your employer contribution anytime thereafter.

You might be saying to yourself, “Great but my company matches on a graded scale, what does that mean?” Keep an eye out for a future blog post explaining graded vesting schedules!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.