Don’t Lose Your Match: The Danger of Ignoring Your 401(k) Vesting Schedule

It’s common financial advice – save enough in your 401(k) to get the company match.

It’s great advice (after all, who doesn’t want free money?), but it may not be yours to keep should you change jobs or withdraw from your 401(k).

This is because each employer match follows its own vesting schedule.

And, if you don’t pay attention to your company’s vesting schedule, you could do some serious harm to your retirement savings – especially if you’re one of the many Americans switching jobs.

A recent LinkedIn study found that “almost 70% of Gen Z and millennial Americans stated they planned to leave their jobs in 2023.”¹

If you’re planning to leave your job in the near future, you need to check your vesting schedule.

The reason is simple. If you leave your job before you are fully vested, you may lose out on the employee match you worked so hard for.

The same vesting rules apply if you want to withdraw from your 401(k), which, according to Vanguard, a record number of investors are doing right now.²

2.8% of participants took a 401(k) hardship withdrawal in 2022, up from 2.1% in 2021.³

And 3.6% of participants took a non-hardship 401(k) withdrawal.⁴

Knowing how your employer’s vesting schedules works is critical for your retirement future.

How 401(k) Vesting Works

401(k) vesting schedule

Let’s begin by discussing what vesting is.

Vesting means ownership.

The money you put into your 401(k) is yours. You own what you contribute.

It works a little differently for employer matching contributions.

About 81% of companies that offer a 401(k) plan made a matching contribution to workers’ retirement savings in 2021, according to the latest annual survey published by the Plan Sponsor Council of America.⁵

But just because your company offers it doesn’t mean you will see the money anytime soon.

This is because vesting schedules differ from one company to another.

A 401(k) vesting schedule is the length of time you must stay working for your company for matching contributions to be 100% yours.

Sometimes you are immediately vested, which means you own those employer match contributions right away.

But most have different vesting schedules, which determine how much of the employer match you own (or are vested in) by how long you have worked for the company.

Different Types of 401(k) Vesting Schedules

401(k) vesting schedule

Vesting schedules are employee timelines to determine how long it takes until an employee is fully vested (or owns their matching contributions).

The different types are cliff, graded, or immediate.


Cliff vesting is when a company requires you to stay employed with them for a specific amount of time before the money your employer contributed is yours.

Employers have up to 3 years to vest employees in this type of vesting schedule.

You do not own any of the employee matching contributions until you reach this specific point.


Graded vesting means you vest a certain percentage of your employer’s matching dollars in a set period of time until you are 100% vested.

By law, employers must vest employees at least 20% at the end of 2 years, and another 20% annually each year thereafter.

This means, by the end of year 6 working for your company, you will be 100% vested for the company match.

An immediate vesting schedule means you own your employer’s contribution as soon as you receive it in your 401(k) account.

According to a PSCA survey, “More than 44% of 401(k) plans offer immediate full vesting of a company match.”⁶

What Happens When You Aren’t 100% Vested and Leave a Job?

401(k) vesting schedule

Let’s say your company has a cliff vesting schedule, and you get offered a new job before you have reached the company’s 3-year mark to be vested.

You’d have to forfeit the money your employer contributed. 

Similarly, let’s say your company has a graded vesting schedule, and you leave the company before you are fully vested.

You will owe your company the percentage not vested.

For example, if you leave the company after 4 years and your company has a 6-year vesting schedule, you will own 60% of the amount your employer has contributed if they vested 20% at the end of year 2, 20% year 3, and 20% year 4.

This could be a serious issue for many people.

According to a 2022 research study by Principal Financial Group, “Company 401(k) plan matches are identified as important to reaching retirement goals by 62% of workers.”⁷

If the company match is important to meeting goals, you don’t want to have to give the money back.

While we don’t want to suggest you stay in a terrible job, we do suggest learning your company’s vesting schedule so when you are ready to leave, you can know what you will keep and what you will have to forfeit of your employer matching funds.

401(k) Withdrawals and Your Vesting Schedule

401(k) vesting schedule

Should you want to cash out your 401(k) – which is not advisable – or withdraw a certain amount, you are only allowed to withdraw amounts that are vested. 

Just like with changing jobs, you can only make withdrawals from 401(k)s that are fully vested.

Take Control of Your Financial Future

401(k) vesting schedule

401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance. 

We review and rebalance your account for you with the goal in mind of keeping you in what is working and out of what is not. 

With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.

See how it works

Have questions or concerns about your 401(k) performance? Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.

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