2007-01-19 08:50:17 · 9 answers · asked by andrea k 1 in Business & Finance ➔ Personal Finance
If you work for a company and they pay money into your 401k, they usually have rules about how long you have to work there before you "Vest" in the contributions.
For example, if the company puts in $1,000 in a year they may say that you only vest or have access to it if you stay with the company for a year.
The amount vested means the amount they cannot take back if you don't stay working there.
2007-01-19 08:55:05 · answer #1 · answered by Nusha 5 · 0⤊ 0⤋
Building on Bob & Mr. Money's great answers....
By staying with a company until you are 100% vested (usually 5 years), you stand to significanlty increase the value of your 401k.
For example, assume you make 20k a year, and your company matches 100% of your contributions, up to 5%. You'd be foolish to not contribute at least 5%, because otherwise you're leaving 'free' money on the table. Now, assume that you're 20% vested after 1 year, increasing by 20% each year until you're fully vested after 5. Also, for the sake of this example, assume you get no raises or that your 401k does not appreciate during those 5 years. (That's highly unlikely, but let's assume such to keep the math simple).
After the first year, you'd contribute $1,000, as would the company. However, you'd be 20% vested in their contribution, so your balance is $2,000 but your vested total is only $1,200.
In the second year, you and the company each add $1000, but you're now 40% vested in everything the've contributed. So now, your account balance is $4,000, and the vested amount is $2,800.
In the third year, your vested amount is $4,800 out of $6,000.
In the fourth year, it's $7,200 out of $8000, and in the fifth year, all $10,000 is yours.
2007-01-20 02:34:23 · answer #2 · answered by winters in buffalo 3 · 0⤊ 0⤋
Vested Balance
2016-10-05 22:12:42 · answer #3 · answered by ? 4 · 1⤊ 0⤋
Most companies will match your contributions to your 401k. Whatever amount you contribute, they'll also contribute, at least up to a certain percentage. Most companies cap their contributions at a maximum of 6%.
If you make $1000 a week and 3% of your paycheck is invested in your 401k, then the company contributes an amount equal to 3% ($30) into your 401k. If you contribute 5% of your paycheck, ($50), then your company contributes $50. If you contribute 7% (70$), then your company contributes $60. If you contribute 9% ($90), then your company contributes $60. etc. etc.
Any money you contribute remains in your 401k regardless of whether you remain employed with the company or not. You're automatically vested for everything you personally contribute.
Any money your company contributes is contributed conditionally. The amount that you get to keep usually depends on how long you work with the company. For instance, even though the company has been contributing $60 a week, if you leave after a year, you might only get to keep 10 to 20 percent of that - in other words, you're vested for 10 to 20% of whatever the company contributed. If you leave after 4 years, you might only get to keep 50 percent of that. If you leave after 6 years you might get to keep 100% of everything the company contributed.
The idea is to reduce turnover so the company gets their money's worth out of any expense in training you.
2007-01-19 09:08:05 · answer #4 · answered by Bob G 6 · 3⤊ 0⤋
All of the money you contribute to the plan is 100% yours.
The money the company "match's" becomes yours based on the "vesting schedule." Look into your benefits package or contact HR to find out the details of the schedule. You will either have a "graded" vesting or a "3 year cliff" vesting.
The longer you are at your company, the higher percentage vested balance you will have.
2007-01-19 10:34:29 · answer #5 · answered by MR MONEY 3 · 1⤊ 0⤋
Easy way to think about it. You get back what you put into your account. The company may have given stocks in your 401K. These stocks are not yours until a specific period of time (vesting). Ex: They may all be yours, after you have been with the company for 5 years.
2016-03-29 05:09:39 · answer #6 · answered by Anonymous · 0⤊ 0⤋
that's the actual amount you would be entitled to if you were to cash out today. Most employer matching contributions are on a vesting schedule of 5 years or so...it's a way to keep good employees on board.
2007-01-19 08:55:19 · answer #7 · answered by sharkzfin 2 · 0⤊ 0⤋
Thats how much money is actually yours. if you ended your employment today. Thats how much would be yours.
Your employer makes a contribution. But usually it takes time before that money becomes yours.
2007-01-19 08:53:49 · answer #8 · answered by trichbopper 4 · 0⤊ 0⤋
That's the amount you are entitled to when you leave the company, the amount you've earned.
2007-01-19 08:54:35 · answer #9 · answered by Mike's Girl 3 · 0⤊ 0⤋