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Vested shares mean shares that you own, even if you’re fired or quit. They’re a form of compensation. You most often hear about them as part of the reward for employees at hip startups, but that’s not the only type of company that offers them. Vested shares can also be part of an overall compensation package at an established and publicly traded company, or part of your retirement package.
When you vest, it’s not a choice of attire. Instead, it means you’ve served enough time in your company to gain the right to own its stock. You typically vest over a five-year period, though the time it takes to vest may vary according to the company and the reason for the award. For example, if you receive an award of stock of 1,000 shares that vest over a five-year period, you may vest into 200 shares of stock on the first anniversary of the award. You can’t do anything with the other 800 shares until you reach your second, third, fourth and fifth anniversary dates. On those dates, you vest into an additional 200 shares.