What Is Vesting?
Vesting is the schedule on which employer-granted compensation, most commonly RSUs, stock options, and 401(k) matching contributions, becomes irrevocably yours. Before an award vests, it exists on paper but can be forfeited if you leave, which is exactly the point: vesting is a retention tool that pays you for staying.
The grant date is when the award is promised, the vest date is when a portion becomes yours, and anything unvested at departure is typically canceled. This is why recruiters talk about unvested equity as golden handcuffs.
Common Vesting Schedules
The classic structure in tech and finance is four-year vesting with a one-year cliff: nothing vests during the first 12 months, then 25% vests at the one-year mark, with the rest vesting monthly or quarterly over the remaining three years. On a $100,000 RSU grant, that means $25,000 of value vests on your first anniversary and roughly $6,250 per quarter thereafter.
Graded vesting releases the award in installments, while cliff vesting delivers it all at once after a set period, such as 100% after three years. Some banks use back-loaded schedules for deferred bonuses, vesting a larger share in the final year to strengthen retention.
Vesting in Your 401(k)
Your own 401(k) contributions are always 100% yours immediately, but employer matching dollars often vest on a schedule, commonly graded over two to six years or a three-year cliff. Leave a job after two years under a three-year cliff and the entire match balance is forfeited back to the plan.
Before timing a job switch, check your plan's vesting schedule, because staying a few extra months can be worth thousands of dollars in matched contributions. The vested balance is shown separately on most 401(k) statements.
Career Strategy Around Vesting
When evaluating an offer, compare vested value per year rather than headline grant size, since a $200,000 grant over four years is $50,000 per year before any stock price movement. Competing employers frequently offer sign-on bonuses or make-whole grants to replace the unvested equity you would forfeit by moving.
Track your vest dates and the value at each vest, both for negotiation leverage and for taxes, since RSU vests are taxed as ordinary income when they occur. A simple spreadsheet of grants, schedules, and vested-versus-unvested value keeps the picture clear.
