Vested Interest


DEFINITION of 'Vested Interest'

1. The lawful right of an individual or entity to gain access to tangible or intangible property now or in the future. A vested interest is an entitled benefit, which can be conveyed to a separate party. There is usually a vesting period before the claimant can gain access to the asset or property. Due to the right of ownership, the benefit can not be taken away i.e. the vested funds are not contingent on any action or inaction.

2. A financial or personal stake one entity has in an action, separate entity or commitment, with the expectation of realized benefits in the present or the future.

BREAKING DOWN 'Vested Interest'

1. This can most notably be seen in employee pension plans. Contributions are made under the stipulation that retirement funds will be entitled to the participant, known as a vested right. The vesting period (period of time before access is granted) varies among pension plans. The withdrawal amounts can be restricted to a certain percent each year. For example, after waiting the five year vesting period, Peter was only allowed to withdraw 20% of his retirement fund each year.

2. In this case, the outcome will affect the entity, thus creating a vested interest. For example, if you have a mortgage, your bank has a vested interest in your ability to make your periodic payments.

  1. Vesting

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  2. Employee Savings Plan

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  3. Simplified Employee Pension - SEP ...

    A retirement plan that an employer or self-employed individuals ...
  4. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Rights

    A security giving stockholders entitlement to purchase new shares ...
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  1. Is an employee eligible for an SEP if the plan has already been set up for other ...

    It depends. The employee should meet not only the service requirements, but the age and compensation requirements as well. ... Read Full Answer >>
  2. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  3. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  4. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  5. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
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    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>

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