What Is Vesting?
Vesting is the process by which an employee gains full ownership of employer-provided benefits, such as matching retirement contributions or stock awards, over time. An employee's own contributions to a 401(k) are always fully vested, but employer contributions may follow a vesting schedule.
Cliff vs. Graded Vesting
With cliff vesting, 0% is owned until a set date and then 100% at once. With graded vesting, ownership increases step by step, for example 20% per year of service.
Leaving Early
If employment ends before full vesting, the unvested part of employer contributions is generally forfeited.
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.