Vesting Schedules (i.e. when do you get your 401(k) match?)

Most people know about the employer match for 401ks.  What most people don’t know is that you are not entitled to that money right away.  You have to work for a certain amount of time before you get to take your employer match with you when you leave.  So when you put money into your 401k and your employer gives you a match, imagine them being put into separate accounts.  (I say “imagine” because they’re not actually in separate accounts.  But imagining that they are makes the concept a little easier to digest.)  The account that has just your money in it is 100% yours to take with you anytime you leave.  The account that has just your employer’s money in it has what’s called a vesting schedule – a schedule that tells you when you are entitled to that money.  Your employer’s vesting schedule is most likely either 2-6 year graded or 3 year cliff.

If it’s 2-6 year graded…

After you work there for:

2 years, you get 20% of the money in your “employer’s account”

3 years, you get 40%

4 years, you get 60%

5 years, you get 80 %

6 years, you get 100%

If it’s 3 year cliff…

You don’t get any of your employer’s money until you’ve worked there for 3 years.  But once you hit the 3 year mark, you get 100%.

Where can you find your company’s vesting schedule, you ask?  In the Summary Plan Description provided by your HR department.  Knowing this information is important because lets say you were thinking about quitting your job after being there for 5 and a half years.  If your company has a 2-6 year vesting schedule, you can get 100% of your employer match just by waiting 6 more months before you quit.

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Renter’s Insurance

I’ve never considered getting renter’s insurance until recently, when I had to find a new roommate for my apartment for the 4th time.  I’ve been living with roommates (most of them being total strangers) since my first year of college and it never dawned on me that I could have my stuff damaged or stolen until now; probably because of all the horror stories I heard in CFP classes.  Ignorance is definitely bliss!  Plus, now that I’ve been working full-time for several years, I actually own a few valuables worth stealing.  Not so much the case in undergrad.

After reading this article, I decided to shoot my insurance agent an email to get her thoughts on the matter.  Long story short, if my parent’s home is considered my “primary residence” I would be covered for damaged or stolen property up to a couple thousand dollars (after the deductible, of course).  A couple thousand dollars would certainly cover all my “valuables” in the apartment.  However (and this is a BIG however), I wouldn’t have any liability coverage.  No liability coverage is a huge problem because if someone got hurt in my apartment, my roommates and I could potentially get sued for an indefinite amount of money.

So then getting renter’s insurance for the liability coverage is a no-brainer, right?  Not necessarily.  If you want to be extra cautious and you don’t like being susceptible to any risk, then yes, renter’s insurance is a must.  But it’s still a trade-off.

Most of my friends don’t have renter’s insurance because it probably never crossed their minds.  But some people simply don’t need that coverage as badly as others.  For instance, if you live alone and hardly have guests over, you’re not really at risk for getting sued by an injured visitor.  So paying the insurance company an X amount of dollars every month for that protection may not seem worth it.  But if you or your roommates have people over all the time, especially people you don’t know very well or people who like to bring their young children, then you should definitely considering getting it.  Same thing if you have an aggressive dog that might attack a visitor or neighbor.

As for me, I think I’ll get a quote and see how my roommates feel.  If it’s inexpensive and they’re willing to split the cost with me, might as well.