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Allocation of employer retirement contribution before it becomes vested

Home Retirement Accounts Allocation of employer retirement contribution before it becomes vested

  • Avatar AbenaK 
    Participant
    Status: Physician
    Posts: 2
    Joined: 09/12/2018

    Hello everyone,

    This is my first time posting on this forum, but I visit this website (along with Physician on Fire & Bogleheads) almost daily. My husband and I were lucky enough to start our financial literacy journey during the beginning of my anesthesia sub-specialty fellowship and it has prevented us from making significant mistakes since I took my first attending job this past summer. I am starting this thread because my husband and I have a total of seven retirement accounts (he as a 403b, rollover IRA, and Roth IRA while I have an ORP, 403b, 457, and Roth IRA). We have been making max contributions to all of our pre-tax accounts and have decided on an asset allocation of 70/30 with a three fund portfolio. This asset allocation seems to be perfect for our risk tolerance so far. My questions is what to with my employer contribution to my retirement account. My employer has a 10% match of base salary, bonuses etc. However, only 4% of that money is immediately vested and the other 7% becomes vested after 5 years. So far, the employer contribution is turning into a significant amount of money. Should we include the non-vested contributions in our overall asset allocation when we balance our portfolio? I love my job and plan to stay for the long-term, but plans can change. I’m estimating that the cash contribution once vested in five years will be around $200k. I’m just afraid that if we don’t include this amount in our overall asset allocation now that in five years when I do become vested in the contributions our portfolio will be far off from where we want it in terms of asset allocation.

    I hope that my question makes sense. Thanks in advance.

    #178275 Reply
    Avatar justlearning 
    Participant
    Status: Other Professional, Spouse
    Posts: 112
    Joined: 08/15/2017

    welcome to forums. I will let pros to chime in. I would not change my asset allocation for that and i would not count in my net worth as well until it is vested.

    #178296 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1022
    Joined: 02/15/2016

    I don’t know why you wouldn’t include it. I’d include it in your allocation. It’s your money. How would you even invest it differently? Our profit sharing contributions are vested but it just gets tossed in like all the other contributions. If we leave, then the contributions would be removed.

    #178300 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1701
    Joined: 03/01/2018
    Splash Refinancing Bonus

    There’s no right or wrong answer. I’d probably include it in my numbers if I thought it was likely I’d still be at the job for the funds to vest

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #178308 Reply
    Liked by Tim
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 1789
    Joined: 09/18/2018

    1) I’m just afraid that if we don’t include this amount in our overall asset allocation now that in five years when I do become vested in the contributions our portfolio will be far off from where we want it in terms of asset allocation.
    You plan to stay, so include it.
    2) Your allocation is based on your best estimate.
    When the facts change, change as needed to adjust.

    One way or another, in between, how would think one would best address it? I can’t think of a reason to exclude it. You plan on staying there, best wishes.

    #178316 Reply
    Avatar AbenaK 
    Participant
    Status: Physician
    Posts: 2
    Joined: 09/12/2018

    Thanks everyone, will go with the general consensus and include it

    #180127 Reply

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