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Old 06-02-2010, 09:07 AM   #1
 
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Default What does it mean to be "vested"?

In terms of retirement funds and things like that?

At my job we are part of state teacher's retirement plan, and I know that I will be vested after I have been working there 10 years. But what does that mean? I assume it means that I will be able to draw from the retirement fund that I will have accumulated, but really, I don't know...
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Old 06-02-2010, 09:09 AM   #2
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If you are 100% vested, it's all yours.
Speaking of that, mine's been sitting a while...I guess I'll wait until I can get it when I retire...oy
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Old 06-02-2010, 09:11 AM   #3
 
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It means that you legally have some sort of interest in (i.e., right to) a certain property. You may have a present interest (you own the property, you can use someone else's property) or a future interest (someday you'll own the property).

So, once you work for 10 years, you'll have an irrevocable right to the money ensured by the retirement plan.

Wikipedia has a good explanation.

Last edited by Eilonwy; 06-02-2010 at 09:15 AM.
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Old 06-02-2010, 09:41 AM   #4
 
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Quote:
Originally Posted by Kikapoo View Post
In terms of retirement funds and things like that?

At my job we are part of state teacher's retirement plan, and I know that I will be vested after I have been working there 10 years. But what does that mean? I assume it means that I will be able to draw from the retirement fund that I will have accumulated, but really, I don't know...
In a typical retirement fund you put a certain amount of money aside and the company may match a certain percentage of the money you put in.

The money that you put in is yours and you will eventually get all of that when you retire. Some companies will make you work a certain time before you have earned the amount of money they put in. They may prorate it too. So after 2 years you may be 20% vested after 4 years 40% vested etc.,

so when you get a retirement plan statement, it should tell you how much money you have and how much money you have currently vested. In 10 years you will have all the money available for retirement.

You will not be able to withdraw any of this until you reach retirement age or you will have to pay a 10% penalty on top of the taxes to be taken out.
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Old 06-02-2010, 09:42 AM   #5
 
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In the case of retirement funds it means that if you leave your job, you take 100% of the money with you. You usually cannot withdraw from a retirement account until you're 59 1/2, without paying a penalty. There are exceptions (hardship, buying a home, etc) but you usually have to pay those funds back or you pay a penalty.

You'll want to check whether it's cliff vesting or not. Cliff vesting means that if you leave the company before 10 years, you get nothing. Otherwise, you can get a percentage of the funds depending on when you leave. For example, 10% if you leave after one year, 20% after 2 years, etc.
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Old 06-02-2010, 09:56 AM   #6
 
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In my state, state employees are fully vested in 7 years -- i.e., when they retire, they can claim their full retirement benefit they have been paying into. If they leave state service before year 7, they might never get any of that benefit or only a percentage.

As a state employee, you don't pay into social security. When you retire, you won't be able to draw social security (unless you've had other nonstate jobs that paid into social security). In order for you to get that monthly retirement benefit check (similar to social security) after you retire or are 63 or 65 or whatever, you will need to be vested into the state retirement system.
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