Microsoft's Deferred Compensation Plan is one of the most powerful benefits available to senior employees—and one of the most underused. On its own, it defers taxes. Paired with the right stock strategy, it can do much more. At Consilio, we help clients coordinate every element of their compensation so each piece works harder together than it ever could alone.
A Microsoft employee came to us with a familiar profile: years of stock awards had left a large share of his net worth concentrated in Microsoft stock, much of it carrying substantial long-term gains. He knew the concentration was a risk, but every time he considered selling, the tax bill stopped him. Meanwhile, he was eligible for Microsoft's DCP but had never enrolled—unsure how much to defer, worried about locking money away, and unclear how it fit into the bigger picture.
We showed him that these two problems were actually one solution. By deferring a meaningful portion of his salary and bonus into the DCP, he could deliberately lower his taxable ordinary income each year. Those lower-income years then became the ideal window to sell down his appreciated Microsoft shares—realizing long-term capital gains at reduced rates while keeping his overall tax bill in check. Instead of choosing between deferring income or diversifying, he could use one to make the other affordable.
Together, we built a multi-year plan.
We modeled his DCP elections each enrollment window, calibrating salary and bonus deferrals to manage his marginal tax bracket rather than simply deferring the maximum by default.
We mapped out a systematic, multi-year schedule of Microsoft stock sales, prioritizing the highest-basis long-term lots first and sizing each year's sales to fit within the tax room the deferrals created.
We reinvested the proceeds into a diversified portfolio, steadily reducing his single-stock exposure without disrupting his lifestyle or triggering an outsized tax hit in any one year.
We structured his DCP distribution elections around his expected retirement timeline, spreading future payouts across years when his income—and tax rates—should be lower.
We coordinated the whole plan with his ongoing stock vesting, ESPP participation, and charitable giving, so every new share and every deduction had a defined role.
Over those years, the client meaningfully reduced his concentration in Microsoft stock—without the punishing tax bill that had kept him frozen in place. What once felt like two separate dilemmas became a single, coordinated strategy, and he now has a diversified portfolio, a funded deferred compensation plan, and a clear picture of how both will support his retirement.
DISCLOSURES:
The scenarios described are illustrative and reflect composite situations based on actual client experiences, with identifying details and figures changed. They are provided for informational purposes only, are not representative of the experience of all clients, are not a guarantee of future results, and individual results will vary based on each client's specific circumstances.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
Consilio Wealth Advisors, LLC ("CWA") is an investment adviser registered with the U.S. Securities and Exchange Commission ("SEC"). Registration does not imply any particular level of skill or training. CWA provides investment advisory services to clients nationally and notice-files in those states where notice filing is required. CWA renders individualized responses to persons in a particular state only after complying with all applicable regulatory requirements, or pursuant to an applicable exemption or exclusion.
