Microsoft 401(k) & Retirement

Avier Wealth Advisors is not affiliated with Microsoft. While Avier communicates with its clients regarding their Microsoft employee benefits, and educates itself on the Microsoft Benefits, there is no guarantee that the information we have provided is accurate. Microsoft employees are encouraged to contact their employer should they have any questions regarding their specific employee benefits.

Microsoft’s 401(k): What it is & Who is Eligible 

The Microsoft 401(k) is a retirement savings plan that allows employees to invest a portion of their salary into long-term investments and save for their retirement.Your contribution and the Microsoft match are 100% vested from day one with the company.

The tax benefits associated with a 401(k) plan include being able to make deductions from your salary on a pre-tax basis. This can lower your annual taxable income. Your 401(k) earnings accrue on a tax-deferred basis, meaning the dividends and capital gains accumulating within your plan are not subject to tax until they are withdrawn at retirement. Many people are in a lower tax bracket when they retire which compounds the tax reduction benefit of saving into a 401(k).

Microsoft’s 401(k) Contribution Matching System 

Microsoft matched 50 percent of what is put in by employees (Employees can contribute up to $19,500); in other words, Microsoft will contribute up to $9,750 in matched funds.

There are two ways that employees can contribute to their regular 401(k) ($19,500):

Traditional Pre-Tax 401(k)

Make contributions before taxes. You get a tax break up front, lowering your current income tax bill; however, money withdrawn at retirement will be taxed.

Roth 401(k)

Make contributions after taxes. With this option, when you withdraw savings for retirement, you are not taxed.

Microsoft’s Mega Backdoor Roth Conversion

We consider the Mega Backdoor Roth Conversion one of the most valuable benefits available to Microsoft employees, we encourage anyone who is able to utilize it to do so. This benefit allows employees who are maxing out their 401(k) contribution ($19,500 if you’re under 50 and $26,000 if you’re over 50) to contribute aftertax dollars to their 401(k) up to the Federal limit. In 2021, this limit is $58,000 for individuals under 50 and $64,500 for people over 50, meaning employees can contribute an additional $28,750 to their 401(k) and then convert those dollars to a Roth within the 401(k) plan. 

The Mega Backdoor Roth allows you to save even more for your retirement and reduce some of your future tax liabilities. For a more in-depth look at this powerful option, see our article on the Microsoft Mega Backdoor Roth Conversion.

It’s important to note how employees can contribute to their 401k and how much they are able to: as of 2021, employees could contribute up to 65% of their compensation towards the annual limit between Regular 401k contributions and After-Tax contributions.


For more information and advice from our Microsoft-focused advisors visit our main Microsoft page, or other pages focused on Microsoft Compensation and Miscellaneous Benefits, or Microsoft RSUs and ESPP. If you are a Level 67 or higher employee at Microsoft, visit our Microsoft Deferred Compensation Plan page.





READY to get started?

Focused on your needs, we provide comprehensive financial planning and investment advisory strategies for individuals and families. We’d love to hear from you.