Personal Finance

I'm a 49 year old school teacher making less than $100k - how do I overcome my fear of managing my $4 million nest egg?

Chris MacDonald

Published: December 7, 2024 7:30 am

Imagine dedicating decades to a career built on passion rather than paychecks. Suddenly, you find yourself with a fortune you never anticipated. This is the story of a 49-year-old schoolteacher who earned less than $100,000 a year during the course of their career, but who also inherited over $4 million. For many, this sounds like a great problem to have. And it is. But it’s also true that with greater capital comes greater responsibility (that’s I think how the saying goes), so there’s undoubtedly a great deal of stress on the table for many individuals that haven’t handled these kinds of sums before.

For this particular individual, managing a nest egg of $4 million without a pension or full Social Security payments to rely on can provide some stress, as it will mean ensuring that her needs can be fully met, while she’s also able to potentially retire early (if she feels this sum is large enough). It does appear in her comments she may pursue a sabbatical or some form of time off from work (given her self-reported burnout), but is unclear on her path forward as to whether a “FIRE” (financially independent retire early) situation is right for her.

Let’s dive into what may be this individual’s best way forward, and if early retirement may be in the cards for someone looking to rely on a $4 million nest egg to stop working at 49 years of age.

Key Points About This Article:

• Coming into a relatively large inheritance at 49 years of age is a welcome scenario for many individuals, but the question is just how long such a nest egg may last.
• Let’s dive into the “FIRE” (financially independent retire early) discussion for an individual in such circumstances, and what this person may want to consider.
• Also: Are You On Track to Retire? Take This Quiz and Find Out ^(Sponsored)

Understanding Financial Paralysis

Financial paralysis is a real thing among many individuals. Of course, seeking out advice from financial experts (which this woman appears to have done, talking to multiple financial advisors) is a great start. But everyone’s got their own opinion of what an individual can or should do with $4 million. 

Most financial advisors live by the 4% rule, which is that retirees should plan on spending roughly 4% of their retirement account each year to be able to live out their retirement and have enough left over to survive another 30 years past retirement age (age 60). And while this individual could likely theoretically pull much less than 4% of her retirement portfolio to live off of (4% of $4 million would amount to roughly $160,000 per year), it’s hard to discern what this individual’s living expenses are, and if there are any capital layouts she’d like to put forward (new house, helping her children out with downpayment assistance, etc.). Additionally, cutting one’s working years short may impact this school teacher’s ability to receive maximum social security benefits in retirement, so there are other factors at play when deciding whether or not to retire younger than 50.

That said, being frozen in the moment can be a good thing, and one piece of advice I’ve seen float around from various financial experts is that after a big windfall (such as winning the lottery or coming into a large inheritance), it can be good to live one’s life as if they don’t have this money, at least for a period of time, while figuring out a plan of action. That advice seems to be prescient for this individual, who seems to have plenty of questions about how to move forward.

Information is valuable, and gathering as much concrete and objective information about one’s personal situation can help “unfreeze” the thinking phase toward actionable steps forward.

A Mindset Shift Can Be Important

Changing how one thinks about money, and what a nest egg really means, can take a long time for many individuals. Consulting financial planners and having a plan in place for how one expects to retire is a great thing. But when the time comes to start making decisions (like pulling capital from retirement accounts, or taking early retirement), the once-simple decisions many of us thought about previously can become seemingly more complex. 

Indeed, adopting a frugality or scarcity mindset, where individuals are in constant fear of outliving their savings, can lead to many years or decades of retirement without enjoyment. In the case of an individual with $4 million invested in well-diversified portfolios earning an average of 10% per year, it’s very likely that these funds may not be depleted at all by the end of her retirement, and could actually grow to an even more substantial sum with a 4% withdrawal rate (again, around $160,000 per year), if market trends continue.

We could have a market crash around the corner, and a number of factors could change the math. But if this individual can put together an objective plan based on math and the laws of finance (with appropriate measures in place to ensure worst-case scenarios are put on the table), this is a person who does appear to be in solid standing to consider early retirement at some point in the future. What that exact age is remains up to her.

Financial Independence is a Good Thing

With a solid team of financial advisors and an objective fact-based plan in place, individuals such as this Redditor should be able to have some sort of concrete timeline to retire. Burnout is real, and if the goal is to not have to work (but maybe have some money-making passions that deliver passive income on the side) is a situation that’s on the table, the world could be this person’s oyster.

The question is really how to think about money and investing within the context of how these actions can support one’s lifestyle needs and goals. My view is that investing is a necessary activity for the vast majority of individuals, but at some point, money is meant to be spent and utilized. Balancing those two opposing ideas is difficult and perhaps stressful, but not impossible with the right team and resources at one’s disposal.