Vesting

The entitlement to a present or future asset or benefit, usually referring to an employer-provided benefit such as a retirement account.

More Details

Vesting refers to the process by which an employee earns the right to receive certain benefits, such as stock options or retirement savings, over time.

Example

You have been working at your job for three years, and your employer offers a 401(k) retirement savings plan with a vesting schedule—meaning that you will not be entitled to receive the full employer matching contribution until you have been with the company for a certain number of years.

After three years, for example, you might be entitled to receive 50% of the employer matching contribution, and the remaining 50% would vest over the next two years. This means that after five years, you will be fully vested and entitled to receive the full employer matching contribution.

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