A little while back, we wrote a blog post all about Cliff Vesting and what you need to know if that’s in the fine print of your employer’s 401(k) match.
But what happens if you’re reading through the paperwork, and instead of Cliff Vesting, you read about Graded Vesting? Is there a difference?
While the short answer is “Yes” let’s dive into the details of a graded vesting schedule and how they may impact your 401(k).
Graded vesting means that an employee receives the full amount of their benefit, in this case 401(k) match, gradually over time. A common example of this is the 6 year graded vest, which would look something like this:
Year 1: 0% of Employer Match Vested
Year 2: 20% of Employer Match Vested
Year 3: 40% of Employer Match Vested
Year 4: 60% of Employer Match Vested
Year 5: 80% of Employer Match Vested
Year 6: 100% of Employer Match Vested
If you choose to leave your job before the full 6 years, you will only receive the portion of the employer match that is vested. With this vesting schedule, after 6 years with the firm you are fully vested and would receive the total amount of your employer contribution anytime thereafter.
It’s also important to know that any contribution you make to your 401(k) plan is immediately vested, and you will be able to bring that with you even if you separate from service.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.