Personal Finance

I'm planning to quit my job right after I'm fully vested in my 401(k) — is this a good idea?

Kristin Hitchcock

Published: December 13, 2024 9:41 am

I recently came across a Reddit post where the user shared their plan to resign right after reaching the five-year mark to secure full vesting of their 401(k). This seems like a straightforward plan, especially since they’ve invested heavily into their 401(k).

But is it really that simple? Let’s take a look.

Key Points from This Article

• Leaving a job right after becoming fully vested in your 401(k) is a sound financial move, as long as you’ve done your homework. 
• Don’t overlook the details. Confirm your vesting status before you resign. Make sure you can answer these basic 401(k) questions, too. 
• Also: Are You On Track to Retire? Take This Quiz and Find Out ^(Sponsored)

What Does Being Fully Vested Mean?

When you’re fully vested in your 401(k), you own 100% of your employer’s contributions, including any matches. Before you hit this point, leaving your job sometimes means forfeiting some of your 401(k) funds. If you’ve already invested heavily into a 401(k), this can be a huge hit. 

Vesting schedules are often based on your tenure. Simply put, you have to stay at your job for a certain amount of time before you become fully vested. Once you hit this threshold, you typically don’t get punished for resigning. 

What Could Go Wrong?

That said, it isn’t always this straightforward. The Redditor plans to resign two weeks after their vesting anniversary. However, this won’t necessarily ensure their contributions are secured. There are some things to worry about:

• Administrative Lag: Some employers may take time to update your vesting status in the system. It isn’t always an automatic process.
• 401(k) Plan Rules: It’s a good idea to review your plan’s specific terms to confirm when vesting officially happens. In some cases, vesting may be tied to payroll cycles. 

How to Protect Yourself

For those planning to quit their job after becoming vested, here are some steps you can take to safeguard your retirement savings:

1. Confirm the Vesting Date: Speak with HR or your plan administrator to verify when you’ll officially be vested.
2. Document Everything: Keep records of your tenure and any correspondence that confirms your vesting status (like communications with HR from the previous step).
3. Monitor Your Account: Check your 401(k) balance regularly to ensure that contributions and vesting updates are accurate. It’s easier to get problems fixed if you notice them sooner, rather than later.