What does vested mean in my plan? When your employer matches your contribution, they may choose to do a vesting period to encourage employees to stay for a long time. The most common vesting period is 6 years. For every year you work (usually over 1,000 hours in a year) you get vested 20%. So, you can be fully vested in 5 to 6 years depending on the years you receive 1,000 hours. There are some employers that have 100% vesting after 3 years but none during the first 3 years. If the plan is called Safe Harbor plan, then it is immediately 100% vested.

What is a Safe-Harbor 401k? By adopting a Safe Harbor 401k there is not limit for owners & highly paid employees to contribute up to the maximum when the employer matches the first 5% of the employee’s contribution which is 100% vested. Without adopting a safe harbor, the amount owners & highly paid employees of the company can contribute to their 401k would be limited by how much the non-highly paid employees contribute.

What is a 401k Match and how does it work? The match is what the employer may contribute to your account if you are contributing yourself. You will not receive any match if you do not put money in. The match in most plans is at the discretion of the employer and can be changed every year. Regular match can be fully vested over a 3-to-6-year period, depending on the company’s policy Some companies have 401k plan that is called safe harbor. This plan has a mandatory match that is 100% of your first 3% contribution and then 50% on the next 2%. So, if you contribute 3% you only get 3% of the match. If you do 5% or more then you will get 4% and it is vested immediately. This is like getting free money, but even if your company does not match you still need to do your part. You care about your retirement, do not jeopardize it because your company does not!

If you think money is the only thing that matters in your campaign, think again. There are many more things to think about.

My 401k is free, it does not cost any money my company pays for all the fees, is that correct? No, it is not free. It cost money to operate a 401k plan (administration fees). Some companies pay all the fees for this part, and some pass these fees to you as the employee (participant). You do not know that because it is added to the cost of the investment options such as mutual funds in your account. Then there is a cost for each mutual fund. All mutual funds have a cost some are very low, and some are high. These fees are netted against the gain or loss of the mutual fund. You may not see it, but it is there.