# Vesting schedule

Canonical URL: https://olomon.com/financial-glossary/vesting-schedule
Markdown twin: https://olomon.com/financial-glossary/vesting-schedule/llms.txt
Category: Assets & Investments (https://olomon.com/financial-glossary/categories/assets-investments)
Also known as: Equity vesting, Stock vesting
Last updated: 2026-04-18

## Definition

A vesting schedule is the timetable that determines when an employee gains full ownership of equity, retirement contributions, or other deferred compensation. The most common patterns are cliff vesting (full vesting at a single date) and graded vesting (incremental vesting over multiple periods, often 3–4 years with a 1-year cliff).

## Key takeaways

- Vesting controls when granted equity or contributions actually become yours.
- A typical RSU or option grant uses 4-year vesting with a 1-year cliff — 0% before year 1, then monthly or quarterly increments.
- Unvested equity is generally forfeited if employment ends.
- Vesting schedules drive critical tax and planning events: 83(b) elections, RSU income recognition, and option exercise timing.

## How Olomon thinks about this

_The following section is Olomon's first-party perspective, informed by our work building a financial system of record. It is intentionally separated from the neutral definitional content above._

Equity grants are one of the largest — and most poorly tracked — components of household wealth for employees of growth companies. Olomon stores grant agreements, vesting schedules, and exercise/sale events alongside the rest of your balance sheet, so projected vested value, future tax exposure, and concentration risk are visible to you and any CPA or planner you collaborate with.

## In-depth definition

Vesting is the mechanism employers use to align long-term retention with deferred compensation. A grant of restricted stock units (RSUs), stock options, or 401(k) employer contributions becomes yours over time according to a defined schedule — not on the day it is granted.

### Common vesting patterns

- Cliff vesting: 0% vested until a single date (e.g. 25% at year 1), then a chunk all at once.
- Graded vesting: vests in equal portions over multiple periods.
- Standard startup pattern: 4-year graded with a 1-year cliff — 25% at year 1, then monthly thereafter.
- Performance vesting: tied to revenue, valuation, or milestone achievement.

## Frequently asked questions

### What happens to unvested equity if I leave my company?

In most plans, unvested equity is forfeited on termination. Vested options typically have a post-termination exercise window (often 90 days), which means a job change can trigger major financial decisions and tax consequences.

### What is an 83(b) election?

An 83(b) election lets a recipient of restricted stock pay tax on the value at grant rather than at vesting. It can be powerful for early-stage equity but must be filed with the IRS within 30 days of the grant. Discuss with a CPA before filing.

## Sources

1. [Equity (Stock-Based Compensation) Audit Technique Guide](https://www.irs.gov/businesses/small-businesses-self-employed/equity-stock-based-compensation-audit-techniques-guide) — Internal Revenue Service (IRS). Cited for: IRS treatment of equity comp and vesting.
2. [Vesting — Investor.gov](https://www.investor.gov/introduction-investing/investing-basics/glossary/vesting) — Investor.gov (SEC Office of Investor Education and Advocacy). Cited for: Definition and basic mechanics.

## Related terms

- [Equity](https://olomon.com/financial-glossary/equity)
- [Tax-advantaged account](https://olomon.com/financial-glossary/tax-advantaged-account)
- [Capital gains](https://olomon.com/financial-glossary/capital-gains)

## Cite this page

Olomon Editorial Team. (2026). Vesting schedule. Olomon Financial Glossary. https://olomon.com/financial-glossary/vesting-schedule

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