The Microsoft Deferred Compensation Plan (DCP) is available to senior directors, partners, general managers, and other executives – level 67 and higher. If you are eligible for this benefit, you can defer up to 75% of your salary and a full 100% of your cash bonus. This has the potential to save you tens or even hundreds of thousands of dollars in taxes each year. When you defer a large portion of your salary and bonuses, you need to develop a plan to ensure you have enough cash to cover living expenses. This video demonstrates how you can use vesting shares of stock – Restricted Stock Units (RSUs) — to help you gain cash-flow flexibility.
RSUs vest multiple times per year and typically vary in amount each vest. Relying on these shares for cash now and for increased retirement savings requires a plan. The value of your RSUs will be considered income when your shares vest and you receive Microsoft stock. At the time of vest, your newly acquired shares will not have any taxable gains or losses – so it’s as if you were given cash and decided to use every last dollar to purchase additional Microsoft stock. We recommend you sell these shares immediately after you receive them and instead use the proceeds to help cover living expenses (allowing you to increase deferrals elsewhere). Any additional dollars can be invested in a diversified portfolio to ensure all of your allocation is more than just Microsoft stock! We work with executives to help them save substantially on taxes when deferring large portions of their salary using a custom plan that looks at your RSU vesting schedule and factors in variable share costs to ensure you have the income you need now and in retirement. Please schedule some time with us to discuss your specific needs. Schedule a time here.