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Thinking about quitting your job? Look for this key date to avoid leaving retirement money on the table

"Nothing breaks my heart more than to see somebody quit two days before their next vesting goes up."

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A quarter of Americans say they are thinking about leaving their jobs after the pandemic, according to a March Prudential survey — and a whopping 4 million people actually took the plunge in April. Some want a break after the stresses of the pandemic, while others are seeking better pay, more favorable working conditions, or even a change of professions.

The so-called "Great Resignation" could have serious consequences for these workers' retirement savings. People with employer-sponsored retirement plans should be aware that they might lose some of the money in their accounts if they quit.

Vesting is how long it takes for you to 'own' your employer match

Knowing how much of your retirement money you get to take with you when you leave your job comes down to the question of vesting — the amount of time it takes for you to "own" the employer matches and other contributions in your account.

The money you contribute, and any growth of those funds, is yours to take with you when you leave a job. But if your employer provides a dollar-for-dollar match on contributions to your 401(k), 403(b), or other employer-sponsored account, the money that they're putting in may not be yours right away. In fact, in some cases, it can take years.

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"A lot of vesting schedules are like 20% a year, so it takes five years to vest that," says Carolyn McClanahan, a certified financial planner and the director of financial planning for Life Planning Partners in Jacksonville, Florida. "Let's say they gave you $5,000 in profit sharing, but you're only 20% vested. You're going to only walk away with $1,000 of that profit sharing" if you suddenly leave your job.

It may not sound like a big setback, but left to compound over a 40-year career, that lost $4,000 could have grown to more than $65,000.

Not every employer withholds rights to these contributions for an extended period. In its most recent report on American savings, Vanguard reported that nearly 50% of people with a workplace retirement plan in one of its funds have their matches vest immediately.

For the other half of people, vesting schedules vary. Some employers withhold portions of their match for only one or two years of service, while others do so for five years or more.

The schedules are based on your years of service with the company, so once you've put in enough time to be fully vested under your plan, any new employer contributions are yours immediately.

Read the fine print of your employer's retirement plan

If you want to leave your job today, there's not a whole lot you can do about recovering any unvested employer contributions that you'll be leaving on the table. But you can make sure that you're not leaving right before another big vesting anniversary date that would let you leave with more money in hand.

Find information on your employer's specific policy in your hiring documents, or through its human resources department. The date when your matches will vest is particularly important, especially if you're willing to play the long game when it comes to quitting, McClanahan says. If you stay beyond the date that your plan fully vests — even if it's just by a day — you can walk away with a lot more money for your retirement.

"Know the date that your vesting is going to increase, and plan around that date," she says. "Nothing breaks my heart more than to see somebody quit two days before their next vesting goes up."

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