How to Use Microsoft’s “55 and 15” Rule to Retire Early
If you qualify for the 55 and 15 rule at Microsoft, you may be ready for early retirement. In this guide, we’ll walk through the steps you should take to make a smooth transition.
Step 1: Confirm You Qualify
The 55 and 15 rule lets you keep your unvested Microsoft RSUs after retiring, even if you retire early. Any RSUs that are at least a year old when you retire will continue vesting on your usual schedule.
To qualify for the 55 and 15 rule, the following must be true:
You are at least 55 years old.
You have worked at Microsoft for 15 continuous years (any gaps in your employment will reset the clock).
As long as you meet those two standards, you can claim the 55 and 15 rule to retain your unvested RSUs — and early retirement may be an option!
Step 2: Map Your Income Sources
To retire early, you need cash flow. The 55 and 15 rule is your starting block, but you’ll want to make sure you have enough to cover your expenses through retirement.
Tally Your Unvested RSUs
Log in to your Microsoft employee benefits portal. How many RSUs are over a year old? How much are they worth? That’s your baseline.
For example, at $400 per share (2025 average), 50 shares vesting quarterly would mean $20,000 annually for three to five years. Older awards might stretch longer, pushing your income closer to $60,000 a year if you’re a higher-level employee.
Check Your 401(k)
If you retire at 55, the IRS lets you tap into your Microsoft 401(k) without the standard 10% early withdrawal penalty. How much do you have in your 401(k), and how much can you expect it to grow if you leave it in place? Factor these details when projecting your retirement income.
Explore Additional Income Sources
Beyond your RSUs and 401(k), consider other possible sources of income. This might mean further Microsoft compensation, such as shares bought through the employee stock purchase plan (ESPP). It could also mean outside income, such as rental income, IRA accounts, or a part-time gig in retirement.
Don’t Forget Social Security
Will you have to take Social Security payments starting at age 62? If so, this could be a roadblock to your early retirement plans. Delaying Social Security until your full retirement age — or even longer — will greatly increase your benefits later on. See if your income from your RSUs, 401(k), and other sources will allow you to delay your Social Security benefits for a better payout.
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Step 3: Time Your Exit Right
When it comes to early retirement, timing is everything. If you retire too soon (i.e., before the 55 and 15 rule applies), you’re leaving money on the table. Even if you are 55, retiring mid-year could mean missing out on a fresh RSU grant that hasn’t aged to a year yet. Mark your calendar for big grant dates — February and August are common — and plan your notice around them.
Step 4: Plan to Cover the Healthcare Gap
Medicare starts at 65, so you’ll have to bridge the years if you retire early. COBRA helps for 18 months post-retirement, but it can run $12,000–$20,000 a year for a married couple. After that, private plans aren’t likely to be cheap, either.
Can you cover those expenses in early retirement? Factor that into your budget. If possible, max out your HSA contributions before leaving Microsoft. Hopefully, combined with your RSUs and 401(k), you’ll have enough to hold you over until Medicare kicks in.
PRO TIP: Shop for private health insurance plans early — marketplace options might shave costs down significantly if you qualify for subsidies.
Step 5: Test Your Plan
Don’t make your retirement a leap of blind faith. Whatever your projected income is, try living on that for a few months to see if you can make it work. If it isn’t enough, you want to know before you retire, not after.
Plus, taking your new budget for a test drive gives you a chance to optimize. We’ve helped Microsoft retirees tweak their budget until it was perfect before leaving the company. Little changes can make a big difference in your golden years.
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Step 6: Optimize Your Tax Strategy
Even with the rule of 55 and 15, taxes can nibble your RSU gains faster than you might expect. Vested RSUs are taxed as ordinary income, up to 37%. The good news is that because your RSUs vest over several years, you can spread them out to keep yourself in a lower tax bracket.
If you hold onto your MSFT shares for a while before selling them, you can unlock the lower tax rate for long-term capital gains. Using other techniques — such as making Roth conversions before you retire — will also help reduce your tax load.
A fiduciary financial advisor can help you optimize your tax strategy for maximum savings.
Step 7: Plan Your Post-Retirement Lifestyle
Early retirement buys you freedom. You’ll want to make the most of it. Will you travel? Relocate near family? Move overseas? Sketch your first year — hobbies, goals, pace — so you can budget accordingly.
(And make sure you’re ready to make those early days count. The retirement blues can be a real thing if you aren’t prepared for life after Microsoft!)
Step 8: Make It Happen with TrueWealth
The Microsoft 55 and 15 rule is a major bonus for early retirement, but it still takes careful planning. At TrueWealth Financial Partners, we’ve walked Microsoft pros through every step, from laying the groundwork to making the jump and beyond. We’re more than ready to do the same for you.
Is this your opportunity for early retirement? Schedule a free chat with us, and we’ll be happy to game it out. Let’s make your retirement dreams a reality.
FAQs
What RSUs qualify under the Microsoft 55 and 15 rule?
Any grants that are over a year old when you retire will continue to vest on your current schedule.
How do I avoid losing new RSUs?
Time your exit after grants hit the one-year mark — e.g., August 2025 for a 2024 grant — to retain as many shares as possible.
Can I withdraw money from my 401(k) if I retire at 55?
Yes, if you retire at 55, the IRS lets you withdraw from your 401(k) with no penalties.
Can I retire early if I don’t qualify for the 55 and 15 rule?
In theory, yes. But you will lose any unvested RSUs, and you’ll have to pay the 10% penalty to take funds from your 401(k). So while retiring before 55 is possible, it’s rarely wise.
How much income might my RSUs provide?
That will vary based on your grants. Fifty shares vesting quarterly at $400 each could mean $20,000 a year for three to five years. Higher-level employees might see $50,000–$60,000 annually.
What happens to my ESPP shares if I retire early?
Those are yours to keep or sell post-retirement. Holding longer will let you pay the long-term capital gains tax, which is typically lower than the ordinary income tax rate.
Can I work part-time and still use the 55 and 15 rule?
Yes! Your RSUs will keep vesting (and 401(k) withdrawals stay penalty-free), even if you get a part-time gig.
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