Key Points
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You may reach a point where you want to move on from your job professionally.
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Before leaving your job, review your 401(k) plan’s vesting schedule.
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If you’re not fully vested, you risk giving up employer matching dollars that could’ve been yours.
You may reach a point when you decide to quit your job and take a new role. It could be that you’re chasing better pay, a promotion, and new opportunities.
It’s best to try to give your current employer ample notice if you’ll be taking a position elsewhere. Not only is it a good way to help avoid leaving your colleagues in the lurch, but it could also come in handy should you ever need to call in a favor or ask a former manager for a reference.
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But there’s another important move to make before leaving a job. And it’s one that could put a lot of money in your pocket.
Make sure you’re not giving up money in your 401(k)
One nice thing about saving for retirement in a 401(k) plan is getting to take advantage of employer matching dollars. Your company might, for example, match your contributions dollar for dollar up to 3% of your salary. If you earn $100,000 a year and contribute $3,000 yourself, you’ll get another $3,000 courtesy of your employer.
Some companies allow 401(k) savers to become fully vested in their matching contributions right away. But others like to impose a vesting schedule, where you aren’t entitled to that money immediately.
There’s a reason for that. If you vest in your company’s 401(k) match immediately, there’s nothing to stop you from jumping ship at any time.
Companies tend to impose vesting schedules to retain employees. And if yours has that policy and you leave your job, it’s important to see if you’re giving up money for your retirement in the process. If so, you may want to alter the timing of your departure.
Let’s say your company has a three-year vesting schedule for 401(k) matches, and you’re two months shy of vesting in a $3,000 match. Even if you’re convinced you’ll be able to boost your salary by taking a new job, it could pay to wait a bit until you’re fully vested before making a move.
How to find out what your 401(k) vesting schedule looks like
Vanguard reports that based on data from the 401(k) plans it administers, almost 50% let employees vest immediately in employer matching contributions in 2024. But that means roughly half of plans didn’t offer immediate vesting.
If you’re not sure what your company’s vesting policy is, look at your 401(k) plan documents. That information should be there. You can also review your most recent 401(k) statement to see if there’s information on your vested balance.
If that doesn’t work, talk to someone in your human resources or benefits department to get an explanation. If they ask why you’re asking, simply say that you’re just making sure you fully understand how your workplace 401(k) works.
Remember, too, that vesting schedules only apply to contributions your employer makes to your account. Any money that goes into your 401(k) out of your paycheck is yours to keep, no matter what.
But in some cases, leaving a job before fully vesting in a 401(k) could mean giving up a large sum of money. It could still make sense to do so if you have a much better offer on the table. But you need to have the right information before making that call.
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