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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Fletch on October 02, 2013, 08:18:08 AM

Title: vesting schedule
Post by: Fletch on October 02, 2013, 08:18:08 AM
I'm having a hard time using the search function for this, since "vesting" is part of the word "investing", so i'll just ask. I am currently 20% vested in the employer match for my 401k. It is very likely I will not be at my company for the full 5 years required to vest, I will probably be at 60-80%. So how do people account for this in net worth estimates?

1) assume 100% vested until I leave, and then just calculate the "drop" in net worth based on where I am at that point,

2) multiply by the current vested percent, so basically every year there will be a jump up when the percent changes,

3) estimate I will be at 60% (or 80%, I'll have to check the exact schedule) to keep net worth numbers consistent.

The are advantages to each strategy, just curious to hear how other people handle this to accurately reflect their situation. For background, the employer contribution is distributed once per year (around Feb/Mar). My vesting status (I think, will need to double check) changes in May/June. When I eventually leave the company, it would be to start graduate school, so around August. There is still the alternative that I stay with my current company throughout graduate school, which would allow me time to fully vest (but would be a bad choice for other reasons). This is all two years down the road, so not exactly urgent but I would like to settle on a consistent method now.
Title: Re: vesting schedule
Post by: mlipps on October 02, 2013, 09:08:34 AM
We are going with number 2 and subtracting out the unvested portion until it becomes vested.
Title: Re: vesting schedule
Post by: Trip on October 02, 2013, 09:52:16 AM
Make that another vote for #2.  I believe #2 to be the most conservative, otherwise you're technically counting money that isn't accessible yet.  If you decide to leave tomorrow, #2 still works for you whereas the others won't.