Vested Interest

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Employee Savings Plan

    A pooled investment account provided by an employer that allows ...
  3. Simplified Employee Pension - SEP ...

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

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

    A security giving stockholders entitlement to purchase new shares ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
RELATED FAQS
  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. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  3. How can I get a 'pensionado' visa to retire in Costa Rica?

    The first and primary criteria necessary to obtain a pensionado visa in Costa Rica is that you must have a pension or pension-like ... Read Full Answer >>
  4. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  5. How does a pension income drawdown work?

    While there are similar drawdown plans in the United States, a pension income drawdown plan most commonly refers to a specific ... Read Full Answer >>
  6. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
Related Articles
  1. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  2. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  3. Investing Basics

    Why You Shouldn't Manage Your Friends' Money

    Your pals may like your returns, but it isn't wise for you to manage their money.
  4. Taxes

    Can You Deduct Your IRA Contributions?

    We help you answer this important question, which is determined by whether you are considered an "active participant".
  5. Professionals

    4 Traits Of A Top Financial Blog

    With thousands of blogs on the web, it's hard to sort the good from the bad.
  6. Entrepreneurship

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  7. Options & Futures

    Due Diligence In 10 Easy Steps

    Got a hot stock tip? Follow up on it with these tips to avoid getting burned.
  8. Professionals

    Retirement Confidence is Up: Should it Be?

    Research shows that confidence in being able to afford retirement is up but probably shouldn't be, as many aren't taking the necessary steps.
  9. Retirement

    Understanding Defined Benefit Pension Plans

    An employer-sponsored retirement plan where employee benefits are based on a formula using factors such as salary history and duration of employment.
  10. Professionals

    Help Parents Avoid This Retirement Savings Blunder

    Parents should make saving for their own retirement a priority over helping with their children’s college costs.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center