Vesting

Vesting is the timing rule that turns a grant into your property. Your own 401(k) contributions are always fully yours. Employer contributions — the match — and equity grants from an employer often vest on a schedule. Leave before the schedule completes and you keep only the vested portion.

Schedules vary. Some plans vest immediately. Some use graded vesting — for example, 20% per year of service, fully yours after five years. Some use cliff vesting, where nothing vests until a threshold date, after which the whole amount vests at once. Equity grants at private companies commonly use a four-year schedule with a one-year cliff.

Vesting matters most when a job change is on the table. Two months before a cliff is a very different picture from two months after. The exact schedule is in your plan documents or grant paperwork, and it is worth reading before, not after, the decision that turns on it.