Budgeting Mistake: Retiring Before You’re Vested In A 401(k)
Vesting in a retirement plan like a 401(k) means taking ownership of the funds in the account. Even though you own 100 percent of the funds you contribute to your plan, employer contributions are different. As the years pass, you own more of your account.
So when you’re 100% vested, you own 100% of the funds in that account. At that point, your employer can’t take back the money, no matter the reason. Nevertheless, you’ll lose the employer contribution to your 401(k) plan if you quit your job before you’re vested.
There might be reasons outside your control that force you to leave a job early before you’re fully vested. But voluntarily leaving before you own all of the funds in your account means leaving money behind.
So if you’re in a position where you have to leave your job, think about how much you’re vested so that you don’t miss out on those savings.
We hope you found this article on budgeting mistakes helpful and informative. Make sure to leave us a comment below if you have any more great tips for our readers!
And if budgeting mistakes have been on your mind, we highly recommend you also read: Got a 401(k) Plan? Here’s How You CAN and CAN’T Take Advantage of It
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