When your employer puts money in your retirement account by matching the amount you contribute, it doesn’t mean you have the right to that money right away. You may hear the word “vested” used by your company’s HR department—that’s a word for who owns your money. If you’re fully vested from day one, you can take every penny that’s been contributed to your 401(k) by you or your employer whenever you leave. Other companies will require that you work for a certain amount of time before being fully vested, meaning you own all the money you contributed, but not all the money your company contributed, until you have worked the required amount of time.
Cliff vesting: Your employer can make you wait up to three years to own the contributions it has made to your 401(k).
Graded vesting: Your employer can grant you partial ownership of the funds it has contributed, increasing that level over the course of a few years. In most cases, your employer must declare you fully vested within six years of your job starting.
The vesting schedule probably isn’t the sole reason to take or leave a job. But if you’ve been thinking about a career move in the near future, it’s worth checking your vesting schedule to make sure you’ll get to keep all the money you see in your 401(k).