If you are only just entering the professional world, you may be looking to understand various corporate practices that are entirely new to you. After all, it was not too long ago that you were just figuring out how to not max out your credit card limit. You may have heard of stock vesting through the company you work for. You may have been a bit overwhelmed with information and now you find that you do not remember a single thing about what you heard. You probably want to know a little bit more about stock vesting before you decide to plunge into a retirement plan with your company. That is wise. Let this post serve as your guide to all things related to stock vesting.
What Is Stock Vesting?
Stock vesting, or simply vesting, is the process of an employer providing you rights to company-owned stocks that cannot be taken away. Typically, this is seen in the form of contributions to a retirement or pension plan. Stock vesting involves a particular schedule called a vesting schedule. This may be done for large stocks like Intuit stock. To find out more, keep reading.
What Is A Vesting Schedule?
A vesting schedule is the specific timing of how an employee accrues rights to company-made contributions to retirement or pension plans. This stock vesting schedule will vary from company to company, but typically you will see 4-year stock vesting schedules. You should receive this information during your first meeting to discuss benefits when you become eligible. However, if you lost the form or you did not receive one, you can head to your HR department and request another one. HR should be able to provide you with an actual schedule right away. This information is especially important if you anticipate leaving the company anytime before retirement. Make sure to have a copy of your company’s vesting schedule if you wish to be an informed employee.
Typical Stock Vesting Schedule
As mentioned above, most stock vesting schedules are of the 4-year variety. However, there are some other elements that are typical of most stock vesting schedules just as there are for home equity loans. Usually there is something called a one year cliff. This is term that indicates the requirement for employees to be employeed for at least a year before any shares vest. If you are fired or quit after one full year of employment, 25% of your shares will vest at most organizations. Following the first years, typically shares will vest on a quarterly basis, some vest on a monthly basis. Then, if this is a four year stock vesting schedule, 100% of shares will be vested after four years. This is a common vesting schedule, however, it is far from the only one. Check with your company to learn more about your particular stock vesting schedule.
Is Stock Vesting The Standard?
Well, simply put, yes. Stock vesting is definitely the standard when it comes to working in the corporate world. However, it is not such a simple concept. Various companies will vest employee stock at various rates. The single most important thing to know about stock vesting when you are a young professional new to all this, is to get information regarding your specific place of work. If you plan on spending the entirety of your career with one single company, stock vesting is of no consequence to you. However, no one can predict the future. So while yes, stock vesting is indeed the standard, there is no standard for vesting schedules. Remember this. You may wish to visit your HR department to learn more.
Stock Vesting Advantages
Are there any advantages to vested stock? Of course there are. While it may seem like a burden to be chained to your company until your stock is fully vested, it can also provide some advantages. For the employee of course, it is advantageous because it only encompasses employees who are dedicated to the company. However, for the employee it is beneficial as well. If you have been hired and offered vest stock options, you know that your employer sees a future for you with the company. That can provide you some peace of mind regarding debt free living in the ridiculously competitive job market of today. It is also beneficial to know the exact schedule of when the money your company has given you is actually yours. That way, you can make smart decisions regarding the duration of your employment. Stock vesting may seem advantageous for the business only however, it does indeed benefit employees, as well.
If you are just entering the corporate world, all this HR lingo can be incredibly overwhelming. Stock vesting is just one of many aspects of the corporate world that you will need to become familiar with. Remember to visit your HR department to figure out the specific vesting schedule for your company. And if you ever need a refreshing in understanding what stock vesting is, click back here for a quick reminder.
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