What is Microsoft’s 55/15 Retirement Rule?
Are you dreaming about that next exciting milestone away from your tech career into an early retirement? For those aged 55+ and working for Microsoft, there are a bunch of handy benefits the company offers to longstanding employees to help build wealth and grow a healthy retirement fund. You can take advantage of the 401(k) and stock vests at any point, but that’s just the start.
Most notably, you should be aware of the Microsoft 55/15 retirement rule.
What is this rule, and how does it impact your exit strategy? Early retirement takes a fair bit of planning and preparation, so let's dive into the rules and requirements so you can decide if this Microsoft benefit is worthwhile for you.
What is Microsoft’s 55/15 Retirement Rule?
Most likely, anyone working for industry tech leaders like Microsoft, Amazon, and Google knows about their RSU compensation. Restricted Stock Units (RSUs) are intended to incentivize long-term employee retention, since the longer you stay with the company, the more RSUs you’ll earn.
RSUs vest according to a specific schedule, meaning if you leave the company early, you’ll lose any unvested RSUs. Microsoft’s vesting schedule, for example, vests on a 4-year schedule at a rate of 25% per year for on-hire stock awards. Annual stock awards vest on a 5-year schedule, once per quarter, at 20% per year.
Older employees considering an early retirement from their tech careers at Microsoft might choose to remain in their positions for fear of losing a significant chunk of their Microsoft RSUs that haven’t yet vested.
The good news is that early retirement may still be on the horizon if you meet the Microsoft 55/15 retirement rule.
Under this rule, anyone at least 55 years of age who has worked at the company for at least 15 years can still retain their unvested RSUs even after retirement. Any RSUs at least a year old will continue to vest even after you leave the company.
How Else Does Microsoft Support Employee Retirement?
Not only does Microsoft enable you to keep RSUs under the condition of their 55/15 rule, but they also provide an assortment of other policies for building wealth and achieving financial freedom. All of these combined permit you to retire earlier and live the life of your dreams without having to work well into what should be your golden years.
401(k) Contributions
In addition to RSUs, Microsoft also offers a 401(k), which is similar to the offerings of many tech giants. The goal of these plans is to create an environment for employees to make long-term investments that fund their retirement. Employees can choose between pre-tax contributions or Roth contributions, depending on their investment and retirement strategy.
What sets the Microsoft plan apart is a generous employer matching program of up to 50 percent of the IRS annual contribution limit ($23,500 for 2025).
ESPP (Employee Stock Purchase Program)
If you work at Microsoft, chances are you believe in the work they are doing to improve the world around you. As a result, you might want to hold a portion of their stock in your portfolio to help secure your retirement plans.
Under the Microsoft ESPP, you can contribute up to 15 percent of your pay (with an annual $25,000 IRS limit) to put toward the purchase of Microsoft shares each quarter. You even get a ten percent discount on the fair market value of those stocks, which means you have more purchasing power with the same dollars.
DCP (Deferred Compensation Plan)
Sometimes, you might want to funnel the money you earn this year into a future year for tax benefits. If you expect that you will be in a lower tax bracket in the coming years, you might want to enroll in Microsoft’s deferred compensation plan (DCP).
How does this work with retirement?
Many Microsoft employees nearing retirement will defer their payments until they leave the company. People in retirement with less income are often taxed at lower brackets, but this is something to discuss with your financial advisor.
Keep in mind that contributions are tax-deferred, invested, and taxed on withdrawal if you enroll in the DCP. This means you might actually earn a return on your deferred earnings.
More Tips for Early Retirement with Microsoft
Even if you’re already maximizing these benefits for your retirement strategy, it is important to do everything you can to set yourself up for success. Nobody wants to come out of retirement to work for a few more years due to poor financial planning.
Here are a few ways to make the most of your money.
Max Out Your 401(k) and After-Tax 401(k)
One of the best things you can do is max out the contributions available in your Microsoft 401(k) ($23,500 for 2025 with a catchup contribution of $7,500 for those ages 50-59 and 64+ or $11,250 for ages 60-63). This will allow you to make the most of the Microsoft matching program.
In addition to maxing out your pre-tax 401(k), you can also make after-tax contributions, which allow you to save beyond the standard individual contribution limits. While these contributions don’t reduce your taxable income today, they can be converted into a Roth 401(k) through the automatic in-plan conversion feature, where future growth and withdrawals are tax-free. This is often referred to as the Mega Backdoor Roth.
If you’re already maxing out your 401(k) and after-tax 401(k), there’s even more you can do!
Depending on your income, you may consider maxing out a Roth IRA (if eligible) or using a backdoor Roth IRA to convert after-tax savings into tax-free retirement income. You can also consider making contributions to your health savings account, 529 plans for children who may want to attend college one day, and private investing in areas like real estate. All of this can set you up for diverse income streams in retirement.
Know Your Retirement Number
Many people will ask some version of the same question as they begin to age: what is the magic number that they should have saved before they leave the workforce behind? Knowing what you need in the bank to support yourself for the remainder of your life can be a complex question.
If you have yet to hit that elusive retirement number, you might want to consider your options. In some cases, people will work longer if they truly love their job and just need a little more cash in the bank. This is especially relevant if your employer offers something like Microsoft’s 55/15 retirement rule. If you have 14 years with Microsoft, it absolutely makes sense to work another year to hit 15 years and take advantage of Microsoft’s program!
It might also mean that they plan to spend less in retirement, cutting back on things that mean less to them. This could also mean moving to an area with a lower cost of living or shifting to a more modest vehicle.
Be aware of your age milestones to ensure that you take advantage of the resources available to you at any given time.
Work with a Financial Advisor
Last but not least, you should always seek help from a financial advisor. Together, you can create an early retirement plan well before you seek an exit strategy. This ensures that you have all the right pieces in motion and can make a plan with the best chance of success come retirement age.
They can help you figure out that retirement number and maximize your Microsoft benefits from a 401(k) to the deferred compensation plan. A financial advisor may have insight into pieces of your income that you never thought of before, or what financial levers you can pull to achieve your goals like early retirement, world travel, or philanthropy.
Embark on Comfortable, Early Retirement with Confidence
At Consilio, we don’t offer financial advice to just anyone. We specialize in financial tips, strategies, and best practices for tech employees at companies like Microsoft, Meta, Google, and Amazon. Your financial circumstances are completely unique, and you need a specialist who knows how to best manage those specifics!
From Microsoft RSUs to Microsoft’s 55/15 retirement rule, we have extensive experience helping Microsoft employees get the most out of their earned benefits and perks. You’ve worked hard for your compensation, and we’ll make sure you’re getting what you deserve!
Check out our free downloadable guides for Microsoft employees so you can start strategizing and making moves for your future. If you’re ready to chat with a fiduciary and see how early retirement is shaping up, reach out to us today for a free consultation.
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