The process by which an employee gains ownership of employer-contributed retirement benefits.
Vesting is the process by which you earn ownership of employer retirement plan contributions (like 401(k) matches). Employers often contribute matching dollars to 401(k)s, but make them contingent on staying with the company—this incentivizes retention. Vesting schedules vary but common ones: cliff vesting (100% after 3 years) or graded vesting (25% per year over 4 years). Once vested, those dollars are yours even if you leave the company; unvested contributions are forfeited. Vesting applies to employer matches and employer profit-sharing contributions, not to your own 401(k) contributions (which are immediately yours). Understanding your vesting schedule helps you decide whether to stay with an employer (if close to vesting) or leave. When changing jobs, consider unvested benefits—sometimes waiting a few months to vest is financially worthwhile.