Microsoft’s Voluntary Exit Offer: What to Weigh Before You Decide

Takeaways

• Microsoft’s Voluntary Exit Offer reached about 60,000 eligible employees on October 26, 2026. Decisions are reportedly due in early December, with departures planned for the end of the year.
• Microsoft describes the package as its standard severance: base pay based on tenure and level, continued stock vesting, and healthcare for a fixed period. Your individual offer documents set the specifics.
• Employers usually withhold federal tax on severance at a flat 22%. In a high-income year, the tax actually owed on it can run well above that.
• The full cost of saying yes includes stock that would have vested after continued vesting ends, along with what you’ll pay for health coverage once any subsidy runs out.
• The decision gets clearer when the package is measured against your whole financial plan, especially your cash runway and what you want the next few years to look like.

If you’re one of the roughly 60,000 Microsoft employees offered the company’s Voluntary Exit Offer (VEO) on October 26, you reportedly have until early December to make a call most people face once or twice in a career. Most people start with whether the package is attractive. A more useful first question: if Microsoft hadn’t made this offer, what were you already thinking about doing? The offer may open the door to a change you wanted anyway. The financial question is whether you’re prepared. The biggest swings come from the stock you’d give up and the tax year the cash lands in.

From a Personal CFO perspective, a buyout is a cash flow event and a tax event arriving at once. Below, we walk through what Microsoft has shared and run the numbers on a hypothetical package. We close with seven questions to answer before the deadline.

For the practical side, including health coverage deadlines and a timeline through your first 90 days, see our companion post, Microsoft’s Voluntary Exit Offer: Benefits and Deadlines After You Accept

What Microsoft has shared about the voluntary exit offer

Microsoft announced the program on October 26. Here’s what has been shared so far:

• Who’s eligible: In the U.S., Canada, the U.K. and India, the offer covers about 60,000 employees at level 70 and below on participating teams. That’s roughly a quarter of Microsoft’s global workforce. Leaders of each organization decided which employees qualify.
• Who’s eligible (continued): Microsoft has said there is no age or tenure requirement and that performance isn’t a factor. It has also said the offer does not replace layoffs, which remain an option depending on business conditions.
• Who isn’t: Some teams are excluded, including the some sales organization.
• The terms: The offer includes a lump-sum payment based on tenure and continued stock vesting, and it can include subsidized healthcare for a period. Each eligible employee received an email linking to their individual offer, which sets the specifics.
• Terms (continued): Microsoft has said the package matches its standard severance: base pay based on tenure and level, continued stock vesting, and healthcare for a fixed period. Career transition services are included too. Your individual offer sets the specifics, including how and when you’re paid.
• The timeline: Reports say employees have until early December to decide, and departures are planned for the end of 2026.

This is Microsoft’s second exit program this year. In the spring, it offered a voluntary retirement program to about 8,750 longtime U.S. employees, and about 30% accepted. Those terms were reported as more generous than this round’s, so if a colleague walked you through their package in May, expect your numbers to look different.

What a Microsoft buyout is really worth to you

The severance figure in your offer is the easiest number to see and the least complete. A fair comparison sets it against what you’d collect by staying through the same stretch of time, and against what you’d lose by leaving on Microsoft’s timeline instead of your own.

Staying has value beyond your salary. Bonus and future vesting count toward it, and so do the 401(k) match and the savings you’d keep building while you work.

A few items belong on that ledger:

• Unvested stock awards. The offer continues stock vesting for a period. Map every vest date against your last day and against the date continued vesting ends, since anything scheduled after that still belongs on the ledger.
• Approaching milestones. If you’re close to an age or service milestone, check how leaving now affects your equity. Microsoft’s stock award agreements define retirement as leaving at 65, or at 55 with 15 years of service, often called the 55-and-15 provision. For awards granted more than a year earlier, those agreements generally let unvested shares keep vesting on schedule. Your own award agreement is the final word.
• ESPP purchases. If you contribute to the employee stock purchase plan, check whether your last day falls before the current purchase date and what happens to contributions already withheld.
• Deferred compensation. Find out how and when any deferred pay comes out after you leave. Those elections are often hard to change.
• Your 401(k). Your final regular paychecks are your last chance to defer 2026 salary into the plan, and they determine how much employer match you collect this year.
• Health coverage. Compare any subsidized coverage in your offer with COBRA, a spouse’s plan or an individual policy for the months until your next coverage begins. Look past premiums to deductibles and out-of-pocket maximums, and check your doctors and prescriptions.

If you were already planning to leave within the year, the package may be a welcome head start. If you expected to stay three more years, the vests you’d forfeit can outweigh the check.

Read the agreement as closely as the numbers. Most severance agreements ask you to release legal claims against the employer, and some add limits on working for competitors or recruiting former colleagues. Check whether you’d be eligible for rehire and whether you could take a role at a Microsoft customer or partner. Note how long you have to sign and whether you can change your mind afterward. In group exit programs, federal law generally gives employees 40 and older at least 45 days to consider the offer and seven days to revoke after signing. An employment attorney can review the terms before you commit.

Thinking through whether to accept Microsoft’s offer? Let’s talk about your complete financial picture. Schedule a complimentary intro call.

How severance is taxed: A hypothetical example

Severance counts as wages. Employers usually withhold federal income tax on it at a flat 22% supplemental rate, and that’s where many people get caught. If you live in Washington State, there is no state tax on wages, so the federal gap is the main event.

Consider a hypothetical single filer:

Hypothetical single filer, 2026	Amount
Base salary	$210,000
Microsoft RSUs vested in 2026	$60,000
401(k) deferrals (2026 limit)	−$24,500
Standard deduction (single)	−$16,100
Hypothetical severance (26 weeks of base, paid in December)	$105,000
Taxable income without severance	$229,400
Taxable income with severance	$334,400
Added federal income tax from severance	≈ $35,900
Federal tax withheld at 22%	$23,100
Shortfall due at filing	≈ $12,800

The severance lands on top of a full year of salary and stock, so most of it is taxed at the 32% and 35% brackets. In this example, the effective federal rate on the severance works out to about 34%, a dozen points above what was withheld.

About this example: This is a hypothetical illustration for educational purposes. It uses 2026 federal brackets for a single filer and covers federal income tax only. It does not reflect Microsoft’s actual offer terms, which vary by employee, and leaves out Medicare taxes. Your results will differ, so model your own situation with a tax professional before acting on it.

5 ways to manage the tax hit from a severance year

1. Confirm the payment year. If severance pays out in January 2027 instead of December 2026, it lands in a year that may carry less other income. Ask HR how and when your payment will be made.
2. Use your remaining paychecks. Any room left under the $24,500 401(k) limit, plus the $8,000 catch-up if you’re 50 or older, has to come from regular pay before you leave. IRS rules generally don’t allow deferrals from severance itself.
3. Fund your HSA. If you were covered by an HSA-eligible plan, 2026 contributions of up to $4,400 (self-only) or $8,750 (family) can lower taxable income. You have until the April 2027 filing deadline to make them.
4. Cover the gap before April. Adjust withholding on your final paychecks or make an estimated payment so the shortfall doesn’t arrive as a surprise. The same underwithholding issue that affects RSUs applies here.
5. Look at deductions you can pull into this year. A high-income year can be a sensible time to fund a donor-advised fund or harvest investment losses. Each comes with its own rules, so model them with your tax advisor first.

Look beyond 2026

Model 2026 and 2027 together, then look a few years further out. Year-end moves can interact in ways that are easy to miss one at a time, so test them as a set. If your income drops after you leave, the lower-income years that follow can open room for a Roth conversion or for selling appreciated investments at lower capital gains rates. They can also change the best timing for deferred compensation payouts. The aim is a better after-tax result across several years, which this year’s bill alone won’t show.

Health coverage

The offer can include subsidized healthcare for a fixed period. Find out how long it lasts and what you’ll pay once it ends. After that, COBRA lets you keep your current plan, though you’ll generally pay the full premium plus an administrative fee. A spouse’s employer plan or an individual policy through Washington Healthplanfinder may cost less depending on your family’s needs. Each option has its own enrollment deadline, and our benefits checklist for leaving Microsoft walks through them.

Cash runway

Start with what actually left your accounts over the last 12 to 24 months. Divide your liquid savings plus after-tax severance by that monthly figure, and the result tells you how long you can go before touching long-term investments.

If you plan to file for unemployment, check eligibility with your state’s Employment Security Department before counting on it. Benefits for people who volunteer for an employer’s workforce reduction depend on how the separation is structured. Our companion checklist breaks the runway math into steps and shows which money to draw on first.

Your Microsoft stock

Many long-tenured employees hold more Microsoft stock than they would ever choose to buy. Leaving doesn’t automatically mean selling. It is a natural checkpoint, though. Once your paycheck no longer depends on the company, it’s worth asking how much of your net worth should still depend on it, and how sensitive your plan is to Microsoft’s share price. Selling has tax consequences, so the timing of any concentrated stock decision belongs in the same conversation as your severance.

The part of this decision that isn’t about money

Offers like this land differently depending on where you are. Some people have been quietly waiting for a door to open, whether for a sabbatical or a long-postponed move to a startup. Others feel a nudge they didn’t ask for and wonder what saying no will mean for their standing. Both reactions are reasonable.

A Microsoft career can provide more than a paycheck. It can also supply structure and a sense of identity, and a plan for leaving works better when it accounts for both.

If you share finances with a partner, the decision belongs to both of you. In a dual-income household, one person’s buyout can reshape the family’s insurance and the timing of shared goals. For employees a few years from retirement, the package can also serve as a bridge. Revisit your early retirement plan before you answer.

One useful exercise: describe, in a sentence or two, what you’d want 2027 to look like if money weren’t the constraint. Then ask whether the package moves you closer to that picture or further from it.

A few follow-up questions can sharpen that picture. What do you want Monday morning to look like six months from now? Are you retiring from something or toward something? If a year away from work became two, would you be comfortable? Name what you’re most afraid of losing by saying yes, and what you’re most excited to gain. Then check whether your spouse or partner pictures the same next chapter, since it’s better to learn that before December.

7 questions to answer before you accept a Microsoft buyout

1. What does my specific offer pay, and in which tax year will I receive it?
2. Which stock awards and ESPP purchases would I give up by leaving at the end of 2026?
3. How will I cover health insurance, and what will it cost each month?
4. How many months of spending do my savings and after-tax severance cover?
5. If I decline, how do I see my role and team over the next two years?
6. How much of my net worth sits in Microsoft stock, and how much do I want there?
7. What would I do with the next year if I said yes?

Why the whole picture matters

A buyout touches nearly every part of a financial plan at once. The tax answer depends on your stock awards. Your runway depends on what health coverage costs, and both depend on what you want to do next.

Brighton Jones’ Personal CFO approach is built to coordinate those pieces, so a decision with a December deadline gets made with your full financial picture in view. Our advisors in the Seattle area have written about Microsoft’s corporate benefits and the factors to weigh when changing jobs, and both are useful reading alongside your offer. So is our companion checklist for leaving Microsoft, which covers the practical steps from now through your first 90 days. The window is long enough to make this decision carefully, as long as the planning starts now.

If you’ve received an offer, three analyses can bring the decision into focus:

• A 12- to 24-month cash-flow plan shows what your household spends and where that money comes from once the paycheck stops.
• A stay-versus-go comparison weighs the offer against the pay and benefits you’d give up, including future vesting.
• A multi-year tax projection covers this year and the lower-income years that may follow.

Frequently asked questions

How is severance pay taxed?

Severance is taxed as ordinary wages. Employers usually withhold federal income tax at a flat 22% supplemental rate, or 37% on supplemental wages above $1 million. If your total income puts you in a higher bracket, you may owe more when you file, so plan for the difference with withholding changes or an estimated payment.

What happens to my unvested Microsoft RSUs if I take the buyout?

The offer includes continued vesting for a period, and your offer documents set how long. Awards scheduled after that period are generally forfeited unless your award agreement says otherwise, as with Microsoft’s 55-and-15 retirement provision. Compare your upcoming vest dates with your last day and the end of continued vesting.

Can I put my severance into my 401(k)?

Generally not. IRS rules don’t let you defer severance paid after you leave into a 401(k). Your remaining regular paychecks are usually your last chance to contribute for 2026, up to the $24,500 limit plus catch-up contributions if you’re 50 or older. Check your plan’s rules with HR or the plan administrator.

Should I take a buyout if I don’t have another job lined up?

It can work if your savings and after-tax severance cover a realistic job search and your health coverage is settled. Start by mapping monthly spending against that runway. If the math only holds for a few months, that is worth knowing before you decide.

About the Author: Scott Moser, CFP®, is a Lead Advisor at Brighton Jones. He helps high-income professionals and families design tax-efficient investment strategies and retirement plans aligned with their values and long-term goals.

Disclosure: Brighton Jones is not affiliated with or endorsed by Microsoft. Offer details reflect information available as of October 28, 2026, and may differ from your individual offer documents. Rules and figures were checked against the sources listed on this page as of that date. Due to various factors, including changing market conditions and/or applicable laws, this content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Brighton Jones, LLC. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Brighton Jones, LLC), or any non-investment related content, made reference to directly or indirectly on this website will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Brighton Jones, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. To the extent that you have any questions regarding the applicability of any specific issue discussed above to your individual situation, you are encouraged to consult with the professional advisor of your