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Vesting is an important concept in the world of employer retirement plans. For most people, they’ll encounter the term vesting when they’re dealing with their employer-sponsored retirement plans such as a 401(k) or 403(b) plan. In this context, vesting refers to how much of your employer match is actually owned by you. Here’s how it all works.
Many employer-sponsored retirement plans offer an employer match on any contributions made by the employee. For example, an employer might match 50 percent of the first 6 percent of an employee’s salary deposited into the account. In this case, the employee contributes 6 percent and receives an additional 3 percent from the employer, resulting in a total of 9 percent.
That’s free money, and it’s one reason that experts recommend employees take maximum advantage. But here’s the catch: That match may not be all yours from day one. Yes, your contributions always belong to you, but the money from your employer may be required to vest potentially for years before it becomes entirely yours…Story continues…
By: James Royal
Source: What does it mean to be vested?
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