Vesting
The process by which you gain ownership of employer contributions to your retirement plan over time. Your own contributions are always 100% vested immediately.
Vesting refers to your ownership rights over employer contributions to your retirement plan. While your own contributions are always fully vested (you keep them if you leave), employer contributions — matches, profit-sharing, or other employer-funded amounts — may vest over a period of years.
There are two common vesting schedules: cliff vesting and graded vesting. With cliff vesting, you become 100% vested after a set period (typically 3 years), with 0% vesting before that point. With graded vesting, your ownership increases incrementally — for example, 20% per year over 5 years or 33% per year over 3 years.
Understanding your vesting schedule is important when considering a job change. If you leave before being fully vested, you forfeit the unvested portion of employer contributions. Some employers use generous vesting schedules as a retention tool. Once you are 100% vested, those funds are yours regardless of whether you stay or leave.
Related Terms
Employer Match
A contribution your employer makes to your 401(k) or similar retirement plan based on how much you contribute, often matching 50% to 100% of the first 3% to 6% of your salary.
401(k)
An employer-sponsored retirement savings plan that lets you contribute pre-tax income (or after-tax with Roth 401(k)). The 2025 employee contribution limit is $23,500.