NEW YORK, Aug. 28, 2025 (GLOBE NEWSWIRE) — Each year, Americans forfeit more than $1 billion in employer 401(k) contributions simply by changing jobs. Many don’t realize what they’re losing.
Employer matches on 401(k) contributions are often considered “free money.” In a landscape where saving for retirement falls almost entirely on the shoulders of individuals, 401(k) matches represent critical employer support.
Roughly half of 401(k) plans offer immediate vesting, giving employees full ownership of their funds right away. The others use a vesting schedule, where employees gain ownership of employer matching contributions over a period set by their employer.
The common assumption is that vesting schedules boost employee retention. However, data shows that most employees are unaware of whether their 401(k) matches are vested, with only 33% of respondents in one major report able to correctly state whether they were in a plan with a vesting schedule.
While employees lose out, someone else wins.
Employers may directly benefit from unvested funds, known as forfeitures. Under ERISA, forfeitures are supposed to offset plan costs for participants, but recent lawsuits allege that some major employers are using former employees’ funds to subsidize their matching obligations for future employees.
The misalignment is clear: 401(k) matching is marketed as a benefit to employees, but the fine print means the company can keep the money unless you stay long enough, a detail often buried, poorly communicated, or ignored.
But what does this mean for individual workers? New PensionBee analysis modeled the cost of incomplete vesting schedules on individual retirement savers, revealing that even partial 401(k) forfeitures can add up to over $61,000 lost by retirement.
A Crisis Hiding in Plain Sight
Under typical vesting schedules, employees must remain with an employer for three to five years to receive their full 401(k) match. With average job tenure declining, workers are at increased risk of forfeiting a significant portion of their retirement benefits each time they switch jobs.
America’s youngest workers and new employees are most at risk. The Investment Company Institute reported that in 2022, a striking 40% of 401(k) plan participants were in their twenties or thirties, with an additional 23% in their forties. Even more telling, 48% of all 401(k) participants had five or fewer years of tenure with their current employer, and one-quarter were recent hires with two or fewer years of service.
The True Cost of What You Don’t Know
PensionBee’s case study modeled the impact of an illustrative vesting schedule on an individual who:
- Earns $50,000 annually
- Receives a 5% 401(k) employer match through a graded vesting schedule that grants one-third of benefits each year over three years
- Job hops approximately every three years before fully vesting, resulting in an ‘invisible loss’ of $2,500 at each move
- Holds 11 jobs over 36 years, just below the national average
While the employee retains $5,000 of a $7,500 employer match at each job change, the compounded loss of $2,500 adds up. Even without factoring in salary increases or cliff vesting schedules, which don’t grant a penny if you leave before the end of your schedule, the analysis reveals this common retirement mistake can cost over $61,000 by retirement.
Table 1: Future Cost of Lost 401(k) Contributions*
| Account | 1 | 2 | 3 | 4 | 5 | 6 |