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Monday, October 10, 2011

Vesting: we're not talking about a piece of cloth here

Recently while out to dinner with some friends, one of them had mentioned that she might leave her job and I said she should make sure she is vested. She didn't know what that meant. So, if you are thinking about jumping ship, you should make sure you fully understand the vesting policies.

Taken straight from an on-line financial dictionary: Vesting is "The process by which an employee with a qualified retirement plan and/or stock option becomes entitled to the benefits of ownership, even if he/she no longer works at the company providing the retirement plan or stock option. Vesting occurs after an employee has worked at the company for a certain number of years; once vesting occurs, the benefits of the plan or stock option cannot be revoked." Basically, once you are vested you get to keep the money you have saved/contributed towards retirement. If you leave your job before you are vested you are not entitled to the savings etc.

This is important because if you are unhappy at a company but have been there a few years, it could be a big mistake to leave before you are vested. Make sure you weigh the options and understand the penalties if you decide to switch positions!

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