Description of image

Question 3

“Vesting determines how much of your employer’s contributions you actually keep if you leave a job. Employers may credit matching dollars to your account immediately but require a vesting period before those dollars become irrevocably yours. Two common styles are ‘cliff’ vesting (you become fully vested after a set time) and ‘graded’ vesting (you gain ownership gradually). Vesting schedules protect employers from paying full match to very short-tenured employees while still rewarding retention. Many savers confuse the presence of an employer match with immediate ownership — the match can appear in your account but still be unvested. The question below tests the definition of vesting in plain terms.”

What does ‘vesting’ in a retirement plan refer to?

Did You Also Know...

By Wise Wallet

An emergency fund covering several months of expenses helps you avoid high-interest debt when income or expenses suddenly change.