How Does 401k Vesting Work?

Vesting in a 401k is a process that is used to determine when the money that is contributed by an employer is available to the employee. Here are the basics of 401k vesting and how it works.

Vesting

Whenever you invest money into a 401k, you are going to be able to set aside a certain percentage of your income to the account. Your employer will also be able to contribute a certain amount of money to your account. When they contribute this money, you will not be able to access this money for a certain amount of time after it is contributed. This process is known as vesting. More of the money will become available to you as you continue to work for the company longer.

Why It Is Done

Vesting is a process that is used to hang onto employees and make them work for the company for an extended period of time. If an employee knows that they are going to forfeit a certain amount of money in their retirement account if they leave, they might be tempted to stay on board longer. After a certain amount of years with your company, you will be able to have full access to the money.

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