Should I leave before my vesting cliff?
Short answer: only if what you gain by leaving now is worth more than the equity that vests at the cliff. Under a typical one-year cliff, nothing vests until the cliff date, so leaving even a day early usually means that whole first block is forfeited. This page does not tell you to stay or go, and it is not tax advice, legal advice, or financial advice.
What is a vesting cliff?
A cliff is a waiting period before any of a grant vests. Carta, which administers equity for many private companies, says the cliff is typically one year at startups, and that when a grant has a cliff, at least 95% of cliffs fall at the one-year mark.
The common pattern Carta describes is four-year vesting with a one-year cliff. One quarter of the grant vests on the cliff date. After that, 1/48 of the original grant vests each month until year four. Leave before the cliff and, per Carta, the unvested shares go back to the company's option pool. You leave with no equity from that grant.
Your plan can differ. Some grants have no cliff. Some have acceleration terms. Refresh grants can come with their own schedule. The grant agreement is the document that counts.
What does leaving early actually cost?
Price the block that vests on the cliff date:
- RSUs: the number of units in the cliff block times a share price you trust
- Options: the number of options times the spread, meaning fair market value minus strike. Options at or below strike have little or no spread.
- Private company: a paper mark is not cash. Discount it if you do not trust the valuation.
Then look past the equity grant. Many 401(k) plans have their own vesting schedule for employer contributions. The IRS allows plans to use schedules from immediate vesting up to a 3-year cliff or a 6-year graded schedule. Your own salary deferrals are always 100% vested. Unvested employer money can be forfeited when you leave. Your plan's Summary Plan Description has the schedule.
A sign-on bonus from your current employer can also have a repayment date. If it does, leaving before that date can add a bill on top of the forfeited equity.
What does waiting cost?
Waiting is not free either. Put the other side of the ledger in writing:
- How many days until the cliff, and whether you can realistically stay that long
- Whether the offer, role, or start date you have can wait that long
- Pay you give up by starting the new package later
- Your health, your team, and anything that makes staying expensive in ways a spreadsheet misses
If the cliff is close and the block is large, some people ask the new employer to move the start date past the cliff. Others ask for a sign-on bonus or a larger grant to cover what they would forfeit. Neither is guaranteed. Both start with knowing the number.
How do you decide?
Compare two figures on the same dates. First, the value that vests at the cliff, discounted if it is private paper. Second, what leaving now is worth to you over the same stretch: the new pay, the start date, and the non-money reasons. If the first figure is small next to the second, the cliff is a weak reason to stay. If the first figure is large and the cliff is weeks away, the calendar is doing a lot of the work.
Options add one more date. Once options vest at the cliff, you still have to exercise them, usually within a set window after you leave. A short window can turn a cliff decision into a cash decision.
FAQ
What happens if I leave one day before my cliff? Under a typical cliff, none of that grant has vested yet, so the unvested shares usually return to the company. The plan's vest date is the line. Your grant agreement governs any exceptions.
Is it worth waiting for the vesting cliff? It depends on the size of the cliff block and what waiting costs you. A large block a few weeks away is expensive to give up. A small block months away may not be.
Does my 401(k) match have a cliff too? It can. The IRS allows employer contributions to vest immediately, after up to 3 years (cliff), or gradually over up to 6 years (graded). Your own contributions are always fully vested.
Can I ask a new employer to cover what I would forfeit? You can ask, for example for a later start date or a sign-on bonus. Nothing requires them to agree.
Where can you check this, and run your own dates?
Sources:
- Carta, Vesting explained: schedules, cliffs, acceleration
- Carta, What are stock options? (one-year cliff share)
- IRS, Retirement topics: Vesting (401(k) employer contribution schedules)
Related: How long do I have to exercise stock options after leaving? and Do I have to pay back my sign-on bonus if I quit?
If you want a private figure for your own cliff and leave date, Worth Leaving runs the stay-vs-go math in your browser. After a verdict, Notify me proves your inbox and saves that run privately. Not a mailing list.