What Is a 401k Vesting Schedule?

A 401k vesting schedule is a schedule that is used by companies in order to keep employees from having full access to the funds in their 401k account for a certain amount of time. This process is used in order to retain talented employees and take them from leaving for another company with all of their money.

With a 401k, employers can make matching contributions to their employees accounts. When an employee makes a certain contribution, the employer can also contribute money to their account and they will receive a tax deduction for this. 

The vesting schedule is used to keep the employee from leaving with this employer match money. Without vesting, the employee could technically quit their job as soon as the match was made and leave for another employer with the money.

With vesting, they will only have full access to a certain percentage of the money after each year until they are fully vested. For example, many companies will use a schedule of vesting 20% per year. After the first year, they would get 20% of the employer contributions. After five years, they would be fully vested and could take 100% of the employer contributions if they left.