Pairing a $2M 401(k) With $120K Pension—Is Retirement Within Reach?

In many ways, being a teacher sounds like my nightmare. The idea of having to wrangle a classroom full of unruly kids day in, day out just doesn’t appeal to me.

But there’s a part of me that wishes I had gone into teaching for one big reason — the benefits. Or, more, specifically, the pension.

See, in my line of work, as well as my husband’s, there’s no pension to fall back on. We have to save very well for retirement because of that. And I sometimes get jealous that my teacher friends get to retire in their 50s with guaranteed income for life.

Having a pension, though, does not automatically guarantee a comfortable retirement. It’s important to save well so you have the income you need for an enjoyable existence. And it can be tricky to figure out if and when you’ve saved enough.

Making sense of your retirement income streams

In this Reddit post, we have someone in their 50s who’s looking to retire with a $2 million 401(k) and a $120,000 pension. And there may be Social Security on top of that to sweeten the pot.

Now when we talk about retiring in our 50s, there’s a risk. At that age, your savings need to last longer than they would for a retirement in your 60s. So it’s important to make sure you’ve saved enough.

Normally, I would actually be a little wary of someone retiring in their 50s with just $2 million. A conservative 3% withdrawal rate yields an annual income of $60,000 with a nest egg that size. That’s a decent amount of money, but not a ton — especially in a high cost of living area.

But the pension is what makes early retirement seem more than feasible for this poster. With $120,000 a year that’s guaranteed to come their way (assuming the plan remains solvent and the terms don’t change), there may be years when they don’t even have to touch their savings. So I think they’re in a strong position to leave their career now if they want.

But that’s my opinion, and I don’t know exactly what the poster wants out of retirement. That’s the bigger question.

Being honest about what your goals entail

Based on the numbers I’m seeing, I could easily make the case for the poster to retire early if they want to. But they need to decide what they want retirement to look like.

Maybe a big goal of theirs is living in a major city and dining at fine restaurants most nights. Maybe they want to take four or five big trips a year.

The poster needs to decide what lifestyle they’re aiming for and see if their total income is enough to pull it off. If they’re not sure, consulting a financial advisor makes sense.

A financial advisor can help the poster figure out how much money they need to pull off their desired lifestyle. An advisor can also help them navigate some of the other complexities that could come with early retirement, like having to figure out healthcare and other such conundrums.

Speaking of which, in the course of retirement, unexpected expenses can arise. It’s important to have a backup plan for when those happen. A $2 million nest egg gives the poster a nice cushion, but they should run through different scenarios with a professional just to be sure. 

There’s also the emotional impact of early retirement to consider. It’s not necessarily easy to leave the workforce in your 50s, even if the financial side makes sense. That’s something the poster will need to navigate carefully once they’ve run the numbers.

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