Straight answer
How does an employer retirement match work?
In many workplace retirement plans, like a 401(k), your employer adds money to your account when you contribute: it matches part of what you put in, up to a set percentage of your pay. The money you contribute is always 100% yours. The employer's match may become yours gradually, over several years of work, which is called vesting. Check your plan's documents for the match formula and the vesting schedule.
What is vesting?
Vesting is when money in your account becomes fully yours to keep, even if you leave the job. You're immediately vested in your own contributions and their earnings. Employer matching contributions often vest over several years of service.
What do vesting schedules look like?
For 401(k) matching contributions, plans can use a 'cliff' schedule, where you become 100% vested after 3 years of service, or a 'graded' schedule, where you vest in steps: 20% after 2 years, then 20% more each year until you're 100% vested after 6. Some plans, like safe harbor 401(k)s, vest employer contributions immediately.
What happens to the match if I leave early?
You keep everything you contributed, plus whatever part of the employer's money had vested by then. The unvested part can be forfeited.
- U.S. Department of Labor (EBSA) — What You Should Know About Your Retirement Plan
Money Mechanics explains how things work in plain language. It is not personalized financial advice.
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