Take the Money and Run? Microsoft Voluntary Exit

If you are a Microsoft employee, you've seen the news from October 26th. The offer was sent out to ~25% of the workforce.

If you are reading this, you may have received that offer and are weighing your options. This article is designed to create a framework to help you understand your options and navigate this material financial decision.

Microsoft hasn't published the terms. Business Insider reviewed the U.S. offer documents and reported the following cash severance (base pay), by level:

• Level 64 and below: 1 week for every 6 months of service, up to 39 weeks
• Levels 65 to 67: 2 weeks for every 6 months of service, up to 39 weeks
• Level 68: 12 months of salary
• Levels 69 to 70: not reported; use your offer letter

The package also may include continued stock vesting (6 or 12 months depending on tenure, for levels 67 and below), health coverage for approximately 6 months, and career transition services.

To put the formula in perspective: a level 64 with 8 years of service and a $165,000 salary would receive 16 weeks of pay, about $50,800 before tax. A level 65 to 67 hits the 39-week maximum at roughly 10 years of service. Your offer letter is the only number that matters, so read it line by line.

You have until December 9th to decide. If you accept, your last day is December 31.

The real question isn't "is this a good deal?"

This is a piece I think that everyone should understand: Microsoft describes this as its standard severance. It's essentially the same package you would expect in a layoff. It isn't sweetened. The voluntary retirement program Microsoft offered in the spring included up to five years of health coverage. This one doesn't.

Microsoft has also said layoffs remain an option depending on business conditions.

Put those two facts together and the offer isn't paying you extra to leave. It's letting you choose when you leave.

Accepting isn't necessarily a windfall. Declining isn't safety. The question is whether you'd rather leave on December 31st on your terms, or stay and accept that the timing may later be chosen for you.

So instead of asking "how much money is this?" ask "does leaving now fit the life I'm building?" If you are nearing retirement, the financial plan can help answer the latter.

A framework: five questions

1. Am I leaving to retire, or leaving to work somewhere else?

If you're retiring, the package is a bridge. The real question is whether your savings can support your spending for the next 30-plus years, starting January 1. Run your retirement plan twice, once with you working another few years and once with you leaving now. If both versions work, the package is a bonus to your timeline. If only the first one works, a few months of severance won't close the gap.

If you plan to keep working, the package is runway. Divide what you'll keep after tax by your monthly spending. That's how many months you can search before touching savings. Be honest about the job market for your role and how long your last search took.

2. How will I pay for health insurance until 65?

For anyone leaving before Medicare, this is the largest hidden cost. You have two main options.

• COBRA keeps you on Microsoft's plan with the same doctors and your deductible progress. It lasts up to 18 months and costs the plan's full premium plus 2%.
• Washington Healthplanfinder sells individual plans. Prices rose an average of 22.2% for 2027, and the extra federal tax credits expired at the end of 2025. Losing Microsoft-paid coverage lets you enroll within 60 days, and open enrollment for 2027 runs November 1 to January 15.

The swing factor is the subsidy cliff. For 2027 coverage, a household earning up to 400% of the poverty line ($63,840 for one person, $86,560 for a couple) qualifies for a tax credit. Earn one dollar more and the credit disappears entirely.

An illustration (estimates): A couple aged 58 and 56 in Washington could pay around $2,850 a month at full price for a benchmark Silver plan in 2027. If their 2027 income stays just under $86,560, their cost for that same plan is capped at roughly $735 a month. That's a difference of about $25,000 a year, decided almost entirely by which year their income lands in.

This is where planning pays for itself. Which tax year your severance is paid in, when stock vests, whether you live on cash or IRA withdrawals, and whether you do Roth conversions all move that income line. Coordinate these before you file, not after.

3. What will I actually keep after tax?

Severance is taxed as wages. Federal withholding on it is typically a flat 22% (37% on amounts over $1 million), which is often too low for high earners and leads to a bill in April. Washington has no state income tax (right now), which helps.

Stock that keeps vesting is taxed as ordinary income when it vests. It also adds to a risk many Microsoft employees already carry: a large share of their net worth in one company. Losing your paycheck while staying concentrated in your former employer's stock doubles your exposure to a single business. Leaving is a natural moment to diversify on purpose.

Timing matters too. With a December 31 last day, find out exactly when severance is paid. A payment in January moves that income into 2027, which interacts directly with question 2.

4. What am I giving up?

• Future equity. Stock beyond your vesting window, future refresh grants, the 401(k) match, and the employee stock purchase plan.
• Retirement provisions. Microsoft’s stock plan has a retirement provision, commonly called 55/15. If you’re at least 55 with 15 years of service, eligible stock awards granted more than a year before you leave may keep vesting on their original schedule. In the spring retirement program, employees within one year of 55/15 also qualified. Confirm with HR whether that applies here before you sign.
• Unemployment benefits, possibly. Washington's new law (HB 2264) treats volunteers as laid off only when the employer announces a layoff in writing and invites volunteers. Microsoft has said this isn't a layoff. Don't count on unemployment until the Employment Security Department confirms your eligibility.
• The option to come back. Employees who accept reportedly can’t be rehired by Microsoft for two years.

5. What happens if I don't accept?

Perhaps nothing, and you keep a job you may enjoy. But Microsoft has cut nearly 20,000 jobs since May 2025, and it has said layoffs remain possible. If one comes, the severance would likely look similar to this offer. What you'd lose is control: the timing, the tax year, the health insurance transition, and the time to plan. Microsoft has also said it has no plans for another voluntary exit offer.

Staying may be the best option for you. It just shouldn't be chosen because it feels like the default.

If you're 55 or older, know the Rule of 55

If you leave Microsoft in or after the calendar year you turn 55, you can generally withdraw from your Microsoft 401(k) without the 10% early-withdrawal penalty. Roll that money into an IRA and you lose that flexibility until 59½.

Many people roll their 401(k) over by reflex after leaving. For early retirees, keeping some or all of it in the plan can be the cleaner bridge to 59½. Decide before you move anything.

Additionally, if you have MSFT stock in your 401(k), understand the Net Unrealized Appreciation (NUA) rules before you roll anything over. You may be able to decrease your lifetime tax bill by using the NUA strategy. More on that here.

Where you sit changes the answer

Ages 55 to 64, financially independent. Often the strongest candidates. The money is less important than the health insurance bridge to Medicare and managing income around the subsidy cliff.

Mid-career and still building. The package is runway. The decision rests on your next role, the job market, and how much stock you'd leave unvested.

Before the deadline: a checklist

• Read your offer letter and confirm the weeks of pay, months of vesting, months of health coverage, and payment date.
• Pull your stock vesting schedule and note what you keep and what you forfeit.
• Get your COBRA rate from Microsoft's benefits site.
• Price a 2027 plan on Washington Healthplanfinder.
• Project your 2027 household income and compare it to the subsidy cliff.
• Run your retirement plan both ways: leaving now and staying.
• Decide your 401(k) strategy, including NUA, before rolling anything over.
• Confirm unemployment eligibility with Washington ESD.
• Review your Microsoft stock concentration and set a diversification plan.

See what your package is really worth

We are Washington State based financial planners just a few miles down the road from Microsoft HQ. We specialize in working with retiring MSFT employees and would be happy to help you look through your package and see if retirement is feasible for you now.

We'll run your plan both ways before the deadline. Schedule a conversation.

Taking the money and running isn't the goal. Leaving, or staying, with a plan is.

This article is for educational purposes only and is not tax, legal, or investment advice. Offer terms reflect reporting by Business Insider, GeekWire, and CNBC as of October 27, 2026, and were not published by Microsoft; your offer letter governs. Health insurance figures are estimates based on KFF data, Washington Office of the Insurance Commissioner rate approvals, and IRS 2027 tax-credit rules; actual prices vary by county, plan, and age. Consult a qualified professional about your situation.

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