Smart Money Podcast: Vest Without the Stress: Mastering Job Transitions and Vesting Schedules

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn how to navigate job changes, maximize retirement benefits, and celebrate personal and financial accomplishments.

How should you navigate job changes when it affects your retirement benefits? What options do military spouses have for saving for retirement? Hosts Sean Pyles and Sara Rathner discuss managing unvested retirement funds to help you understand how to make the most of your employment benefits. They begin with a discussion of the importance of celebrating success after working towards a goal, financial or otherwise. Then Sean talks to Lacey Langford, an accredited financial coach and founder of MILMO, a platform to help the military community better their finances, about tips and tricks for financial planning for military families. Lacey helps Sean answer a listener’s question about changing jobs, discussing how vesting schedules work, how to negotiate benefits with employers, the challenges of frequent relocations, how to maximize retirement savings through IRAs and spousal IRAs, and the importance of tapping into community and government resources to build financial stability.

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Did you hear my dog go through the dog door?

I hear like a bird chirping.

It’s like you’re recording this in the woods.

Yeah, except it’s my gecko’s food that he hasn’t eaten yet.

Oh, that’s disgusting. Okay.

Bugs about 20 feet away from me in a terrarium. Okay, let’s move on.<br>Hey, Sara, what’s the last thing you did that you are really proud of, either financially or personally?

Honestly, I recently made it through this hellish two-week period where multiple major things in my house broke, like our refrigerator, and then my kid caught hand, foot, and mouth disease, which meant I also caught hand, foot, and mouth disease, and I don’t recommend it, honestly.

Yeah, I’ll take your word for it.

Everybody in my household made it out on the other side with a little bit less money, a little bit more sore throat, but we are still on speaking terms, so I consider that to be a win, honestly.

Well, I got out of bed this morning and sometimes that alone feels like a big win.

But this episode, we are going to talk about hard work and enjoying the fruits of your labor. Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.

This episode, we answer a listener’s question about navigating job changes and what it means for your retirement benefits, specifically when you are a military spouse. But first, Sara and I are going to get a little sentimental. We’re going to talk about what it means to work toward a goal and how to celebrate your successes.

Well, I’ve got my box of tissues right here just in case. I am a sympathy crier, so it’ll happen. Anyway, Sean, why did you want to talk about such a sappy topic?

Well, forgive me if this is a little self-indulgent, but I am about to celebrate the culmination of a lot of hard work. After a year of classes and hundreds of hours of studying, I’m getting close to sitting for and, manifesting here, passing the exam that will enable me to be a certified financial planner professional.

For anybody who doesn’t know, being a CFP is the gold standard in financial planning, and it is not easy to become one. I took all the classes a few years back while working two jobs, and I probably spread myself way too thin there because I did not pass the exam, but I’m in good company because apparently the failure rate is 40% or something.

Yeah, it’s a very difficult test.

It is very difficult, but the courses taught me so much that I applied to my work at the time and I still apply to my work to this very day. Sean, I know that you’ve been talking with all of us about your studies over the past year, but do you want to share with our listeners why in hell you put yourself through this?

Yeah, well, as nerdy as it may sound, I really like helping people with their money, and over my eight plus years at NerdWallet, I’ve learned a lot about personal finance, but I got to the point where I began to know what I didn’t know, and I wanted to fill those gaps. So now I know a ton more about measuring investment performance and life insurance and retirement planning and so much more. So as we are recording this, I am a few weeks out from passing this test and it’s a pretty daunting endeavor, but I’m proud of all the work that I’ve put in. And I don’t think we as a society or as a podcast spend enough time celebrating the daily hard work that we all put in toward accomplishing our goals. So as producer and host of the show, I insist that we do so.

I wish you all the best when you sit for this exam.

Well, thank you, Sara. So I want to know what’s something that you are proud of right now?

Well, I mentioned this at the start of the episode, but my old house needed some major emergency help recently. Within a period of a few days, our sewer backed up twice into our basement, twice. And if you’re a long enough time listener, you might remember me complaining about this happening a few months ago. So now that’s three times in less than six months that my basement turned into a cesspool. It turns out that a section of pipe had to be replaced completely, so that was expensive. And then we also noticed a spot on our roof that looked like it needed patching. So we hired a roofer and they did that last week. And in the middle of all of this, our refrigerator died and we had a repair person come out and they said it would’ve cost $1,000 to do the repair they needed to do, and the fridge was almost 10 years old. So they said, “Listen, just go buy a new fridge.” So we took their advice and ordered a fridge that could be delivered to our house the following day. And in the middle of all of that, my kid got sick and had to stay home from daycare for a week. It was endless. I was done being strong after a while, honestly.

Yeah, it’s kind of a cruel joke from the cosmos that all of these things tend to happen at the same time. It’s not just the roof repairs, it’s not just the fridge, it’s not just the cesspool in the basement or the sick kid, it’s everything happening simultaneously.

It was starting to look like we would be out enough money to basically buy a car in cash after all of this, but I will say, taking the time to get multiple estimates ended up saving us thousands of dollars because some home repair professionals want to do the maximum amount of repair and other ones come in and they’re like, “You don’t have to do everything. You can actually do this less expensive repair and it should be fine.” So we still had to tap into some emergency savings, which is there for that purpose.

Yeah, yeah, that’s the whole point.

It ended up thankfully not being like a five-figure week.

Okay, so those of you who are listening to this are probably thinking, “Sara, are you seriously comparing interviewing a few roofers with Sean’s major upcoming professional accomplishment?” I’m not, but sometimes, like I said, those things that you take for granted in life just stop working as they should. And when you finally figure things out and you can breathe again, that’s awesome. You should celebrate that and you deserve to celebrate reaching the other side of that week. Also, just know that not every accomplishment has to be big and work-related. Maybe you’re like me and you’re having a good hair day today and you should celebrate that.

Totally. And for the record, I have no issue with you comparing managing an extremely stressful week with my CFP studies. And if anything, I think that underlines the point I want to make, which is that our challenges, our sacrifices, our accomplishments do come in many different forms and we’re often reluctant to take the moment to really appreciate them. And I want to talk about the sacrifice that it takes to accomplish something that you really want to. So, Sara, what is something that you didn’t do so that you could keep your household in one piece that week?

I mean, there were a couple periods of time during the sewer line repairs where the plumber just told us not to run any water. So interpret that how you will.

Okay, I’m going to refrain from asking any further questions on that.

But on my end, I certainly sacrificed a lot of time with friends and family or even just time to relax and do nothing or putz around my garden so that I could study more. I mean, just ask my partner who saw me spend many an afternoon working away on my studies instead of going on a hike with him and the dog.

I mean, really, the dog was the loser in all of this, but it is still an exercise in saying no to some things, even things you would like to do in order to be able to say yes to other things that are just more important for you right now.

Yeah. One of my instructors would repeat the refrain, short-term pain, long-term gain. It’s a cliche, but it’s very applicable and it’s applicable to many financial goals too. Maybe you’re trying to hit a savings goal to buy a house or you are set on maxing out your retirement contributions this year. We all only have finite amounts of money that we can put toward what we want to do in our lives. So if you’re working toward a financial goal, think about what are you not doing with that money? What are you willing to forego even if it’s a little painful?

Just know that getting to the other side of a long period of sacrifice, it just feels really amazing and you can look back on everything that you’ve done to reach this point with your money, and now you could begin using your money for the things that you intend to and things that you want to do.

Yeah. Well, let’s talk about the other side of the hard stuff, which is that you’ve worked hard, you’ve sacrificed a lot, and then that big moment happened. You paid off your debt, you bought the house. For me, I’m going to take and pass, manifesting here, this big test, and then what? You really do have to celebrate your successes. Sara, did you do anything to celebrate putting out all of those metaphorical fires in your house?

Yes, my in-laws babysat so we could go out to dinner. So thanks, grandma and grandpa.

Yes, I’ll take it anytime. Sean, what are you going to do after you pass the CFP exam?

I think I will be turning off my brain for one complete week and then I’m going to go on vacation. And even if for some horrible reason I don’t get the outcome that I want, I’m going to reward myself for doing everything that I could to accomplish my goal, and that itself deserves to be celebrated.

So what are you going to do?

Well, my partner and I are going to take a long road trip around the Pacific Northwest and visit Vancouver, BC for a bit. Plus, I should probably mention that I am about to take a five-week sabbatical from work.

I already knew that because we’ve had quite a few planning meetings to prepare, but listeners, you’re in on the secret now. It’s not a secret anymore. Sean, go ahead and rub it in all of our faces.

I am so glad to do that, honestly, Sara. NerdWallet has this great perk where if you’ve been at the company for a period of time, you get a five-week sabbatical. So I’m taking my sabbatical this fall so I can spend every waking moment of my life studying and then take and pass the CFP exam and then I’ll still have a couple weeks to travel and relax.

That’s very well deserved. And does that mean that you are leaving me and Elizabeth and our listeners high and dry?

You know I would never do that to you or Elizabeth or our listeners. The Smart Money team has worked ahead, so I’ll still be on Smart Money episodes, but listeners, you will be hearing from my co-hosts Sara and Elizabeth a little more, and I think you’re really going to like what’s coming up over the next few weeks.

We will try to fill your shoes, but we won’t do it so well that you don’t come back.

Don’t worry about that. Okay, so listeners, Sara and I have just talked a lot about our goals, our hard work and how we’ve celebrated our successes or plan to. Now I want to hear from you. What is something that you accomplished financially or otherwise that you are really proud of? Text us or leave us a voicemail on the Nerd hotline at (901) 730-6373. That’s (901) 730-NERD, or email us at [email protected]. While I’m about to leave for my sabbatical, I will be looking forward to seeing all of your responses when I’m back in late November.

And in the meantime, I’ll be reading all of your submissions.

All right. Well, we are just about ready to get into this episode’s money question, but first, we have an announcement. We are running another book giveaway sweepstakes ahead of our next Nerdy book club episode. Our next guest is Jessica Spangler, author of Invest Like a Girl, which shares investing and money tips geared toward women.

To enter for a chance to win our book giveaway, send an email to [email protected] with the subject Book Sweepstakes during the sweepstakes period. Entries must be received by 11:59 PM Pacific Time on October 25th. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page.

And now let’s get to this episode’s money question segment, where we get deep into retirement benefits. That’s coming up in a moment. Stay with us.

We’re back and answering your real-world questions to help you make smarter decisions about your money. This episode’s question comes from a listener’s text message. Here it is.”I work for a company that provides a 401k match. I currently have $45,000 of my money in the account and $7,700 of company match pending vesting. Their vesting schedule is 20% per year over six years. I’ve been working for about two years and might have to move due to my partner’s deployment and leave the company within the next year. There’s a low chance I could stay in the US with the same company and a higher chance I’ll be overseas looking for other work. Thus, it’s likely I’ll be locked in with only reaching the 20% vested threshold. Do you know of any options to obtain the remaining unvested funds for military spouses or have advice on a good approach to this situation? Any other Nerdy financial advice for living abroad with a partner on deployment?”

To help us answer this listener’s question on this episode of the podcast, we are joined by Lacey Langford, an accredited financial coach and founder of MILMO, a platform to help the military community better their finances. Lacey, welcome to Smart Money.

Thank you so much for having me. I’m excited to be here.

Well, Lacey, let’s first talk about vesting. Vesting is a jargony term that just means you get access to money or something over time. So employers sometimes put vesting schedules on the money they put into retirement accounts to encourage employees to stay or so they don’t have to pay out for employees who don’t stick around for very long. People should know that any money that they put into the account that is their own money is not subject to vesting. That’s always theirs. But that said, it can be really frustrating to know that you might have to leave a job that has unvested funds in a retirement account, and I realize this listener probably isn’t able to stay at their job until their funds are vested. But in general, how should people weigh the trade-offs between leaving a job that has unvested funds or sticking around until those funds are vested?

I think he’s done two big parts, which is first understanding the vesting schedule for his company, which a lot of people don’t know, but that’s easy information to find, and then understanding the financial impact. He knows how much money he will lose if he leaves before it’s vested. And so that’s really important too so then you can make informed decisions, but you want to think about comparing your salary and your benefits. A lot of times, military spouses unfortunately don’t have the option of knowing where they’re going to work. A lot of times they get there and then are looking for work.

So if you do know the other company potential, you can compare. So comparing the salary and benefits is really important. You want to look at the cost of living in your new location, which is a big deal for the military community. You could be going to a place that has a lower cost of living, but you could be going to one that’s triple where you’re at right now. So that’s a huge thing to consider. You also want to consider your career growth and advancement opportunities. If you’re going to be working for a smaller company, there might not be as many opportunities for advancements. And so you want to weigh that in the financial aspect of the things you’re looking at.

But everything’s not about money, so you want to look at, do you like the job that you have currently? Are you nervous maybe about the potential job in the future? Do you like the people you work with? I think that’s a really big component, because you could be digging ditches and love the people you work with and it’s great, but you could be making a boatload of money and be miserable every day you show up. And so you might not end up staying at that company. So those are things that you want to think about and compare.

And in the military community, if you’re not sure, there are free financial counselors that can help you weigh those pros and cons to make the decision and walk you through things maybe that you don’t know. And that way, before you commit to a new job and leave money on the table that’s not vested yet, you could have somebody that would be a sounding board.

Yeah. I’m wondering if there might be some flexibility for this listener to negotiate with their current employer and maybe say, “Hey, is it possible for me to work remotely until I hit this vesting mark so I can get access to these funds?” But again, it depends on a job-by-job, company-by-company basis if that’s even possible.

Yes, and this question was a little tricky because he says that his partner is deploying, which a deployment is temporary. In this question, it’s not a permanent change of station, or PCS, where they’re moving. A deployment could be one year. Nowadays, most of them aren’t that long. So that’s another factor. If this is a temporary move, you might want to stay where you’re at, and again, negotiate to maybe go remote if it’s deployment where you have the opportunity to go with your partner or your spouse. But often, when it’s a deployment, you are not allowed to go because it’s normally to a combat zone.

Some companies are very flexible in terms of work location. They might be able to work with you on that. Other companies might take issue if you’re moving overseas. They might not be able to have employees living in other countries. It’s obviously something to speak to somebody in the benefits department at your company and see if that’s even possible where you work, if that’s something you’re interested in. If you are happy to be leaving that job, then that’s another story.

From what this listener was asking, it sounds like they’re thinking that their route is to leave this job once their spouse is deployed, but what they’re interested in doing is obtaining their remaining unvested funds from the employer contribution to their 401k and they’re wondering if there are any specific benefits for military spouses that can help in this situation. So Lacey, is there anything that this listener can do in these very specific circumstances to hold onto more of this money?

The short is no, not really. Since they’ve already been working there two years, if they leave the position, they aren’t going to get those unvested funds. To Sean’s point, I completely agree, is that you should try to negotiate to stay with that company. COVID has made it really great for the military spouse community. There’s a lot more flexibility in hybrid work or remote work. I would lean towards trying to talk to them, because more likely they’re going to want to retain a good employee. The cost of replacing him would probably not be worth it. And so I think that they would really be willing to negotiate. There are some, like you said, nuances about if you’re going overseas with work, but I would lean towards if you want to make sure that you get your money vested is to try to talk with the employer and stay because right now most people can work from anywhere.

When I first heard this listener’s question, I thought about how there’s a relatively new tax credit that was part of the SECURE 2.0 Act of 2022 that allows small business owners to waive vesting for military spouses, among other benefits. This is something that I don’t think a lot of people are aware of, but it makes me wonder about whether military spouses should potentially prioritize looking for jobs at companies that are taking advantage of this credit. Have you seen people do this since this act came into effect or what do you think about this strategy?

You should think about your career goals first because that’s often what military spouses struggle with the most, not having a normal career trajectory. All of these benefits or this legislation that have been put in place are to help military spouses build their careers and their earning ability. So I would start there. I do think that if you are looking at your new location, I would absolutely start there. There are some pros and cons to everything that you do, so I think it really just depends.

And then, also, strategy. A lot of times military spouses know what’s next. They know that they’re only going to be in that location for six months. They know they’re only going to be there for two years or ballpark. Deciding maybe if they want to work at that location, because that’s the other part is sometimes military spouses don’t want to work at the current location because they know they’re leaving or they have small children or other factors that go into it. And so I would say to look at that because that could be a huge advantage to you but also really weigh the pros and cons with your career goals.

So our listener is wondering how to manage saving for retirement as a military spouse. Definitely hard when you have to move jobs a lot. So what options do they have and is there anything unique for military spouses here?

There’s been a lot of new, again, legislation, some executive orders that have come out to help the military spouse and veteran spouse community, also caregiver community, with their earning potential and their careers. I would say the first one is an individual retirement account. That’s not special to the military community, but it’s a huge advantage for military spouses to have control over their retirement that they can take with them no matter where they go, because often you might get a job where they’re not even offering an employer-sponsored account. And so it’s really important for you to be saving for your retirement no matter what.

It’s quite common also to work someplace short, have a 401k, and then have a small balance, go start someplace else. And so military spouses can have six 401ks. Having that individual retirement account is really important because it can have that consistency because there’s other things that go into it. There’s divorce in the military community. There’s death in the military community. So that’s, I think, really important because military spouses’ retirement most often comes second fiddle. So it’s really important to make that a priority in the couple and the family’s savings goals.

And then using resources like the SECURE Act. That’s really important. There’s been an executive order that is now helping with the status of forces of agreement overseas with employment. So there’s all of these things that lend to helping, but there’s no one specific thing that’s unique to military spouses for saving for retirement, not a specific vehicle, but there’s resources. For example, the Department of Defense has an entire website dedicated to military spouse money. It’s MilSpouse Money Mission, and there is a ton of information on there about money and saving for retirement and employment and things like that. I think leveraging those things can help you save.

What I’m hearing from this is that it’s on the military spouse perhaps more than other people who are trying to save for retirement to really take the lead on how they’re going to save for retirement given the potential instability of having to move whenever their spouse is moved around. You mentioned the IRA. That’s one of the best ways that people can take control of their own retirement savings through either a traditional or a Roth IRA. One of the hard parts of potentially being a military spouse is that you might not have what’s called earned income. You might not earn a lot of money on your own, which is typically how you will be able to contribute to a Roth IRA. But there’s this pretty handy strategy called a spousal IRA where if you are married, you can essentially tap your partner’s income and treat that as your own earned income to contribute to an IRA, which gives people a little more flexibility and ability to contribute to one of these accounts. So that’s something that people should look into as well.

Absolutely. Military spouses should definitely do that. Again, it’s not always about the military. It is a family choice with small children at home, no family nearby, childcare issues, those type of things that military spouses choose not to work. So even if you’re not working, you should be using an IRA, the spousal IRA, to save for your retirement, even if it’s just a pause in you working for somebody else. But again, a lot of times your employer might not even offer that. So it really does provide some consistency.

Lacey, you touched on some of these things already, but I’m not part of a military family. I didn’t grow up in one. So this is a whole world that is definitely unfamiliar to me and a lot of other people who have not had any personal experience with this, but I imagine there are many unique financial challenges that come with being in the military or being a military spouse, especially when stationed abroad. Can you talk to us about what some of these challenges are and what people can expect?

Yes. I would say top of the list is un- and underemployment. You may move to a location and the only job available, you’re way overqualified for. An example that happens a lot is you might only be able to find a job at the child development center and you might be an attorney or an accountant or something like that. And then unemployment takes a while to get up and running in a new location, and you might not be able to find a job right away based on that current market.

So that’s a real struggle, and part of that leads to not having two incomes a lot of times. So that’s a huge financial impact for military spouses and their families is to have that inconsistent income to say, “Okay, well, right now we have two incomes. We’re doing really well. We’ve built up our savings. Well, we’re getting ready to move, and we’re not going to have two incomes, so now we’re going to be dipping into our savings.” And if you’ve done something like your car payment is dependent on the military spouse’s income to make that payment, then you have a real problem when you move and they don’t have a job. So that’s one thing.

Also, giving up time to move. There’s often military spouses are taking a knee or taking a pause to make the move and be that consistent grounding person during the move for the whole household. So that takes away from their earning ability and has a financial impact.<br>And then, often you’re a single parent. A deployment, your spouse could be gone for six months or a year or whatever the tempo is at the time. And so for that time period, if you have small children or children that are in sports or whatever it is that’s difficult for you to work and maintain a household on your own. And then military spouses, all of these things lead to a lower retirement savings rate. The money’s kind of left over, “Hey, we’ll put some in your account or your IRA,” but over time, it makes it so the military spouse’s account is much lower, and that’s a real issue, especially during divorce.

It seems like, on the whole, there’s just a lot of instability due to these job changes, being stationed in different locations. Like you mentioned earlier, it’s hard to build a career when you’re moving every few years, potentially hard to get that consistent retirement saving going. Is there any way that people can try to counter this regular instability that people are encountering and working through year in, year out?

I would say start with understanding and using your benefits to the fullest. Using the resources that are available to you and understanding them is really important. There are free counselors on most military installations that can help walk you through everything that you’re eligible for. I would say looking for remote careers where you can have control over your career and your earning ability is really important. Again, COVID has been a huge benefit for the military community in that way, not the world, but in the remote capability.

Going back to the IRAs, using that to your advantage to save for your retirement. I would say too, living off of one income, only living on the service member’s income, can help navigate all that instability and having a much larger than normal emergency or opportunity savings. So it gives you some flexibility because often military spouses like in this listener’s question sometimes end up living on their own and separating for six months or a year because they want to keep their job. But if you have a large savings and you’re accustomed to living off of one income, then it makes it much easier to pivot and handle the instability that comes up with that.<br>I would say, again, taking advantage of free resources and the counselors to help you walk through all that stuff is really important.

It sounds like a lot of the tactics we often bring up around increasing your financial resiliency, like saving more, tapping your local community, finding education that’s relevant to your specific challenges, are all really applicable here, too.

Absolutely, especially the local community when it comes to employment and the resources that you can use. There’s often free ones in the local community for the military, so it’s smart to take advantage of them.

Well, Lacey Langford, thank you so much for joining us on Smart Money.

That’s all we have for this episode. Remember, listener, that we are here for you and your money questions, so send them our way. You can call or text us on the Nerd hotline at (901) 730-6373. That’s (901) 730-NERD. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more info on this episode, and remember to follow, rate and review us wherever you’re getting this podcast.

And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.