Personal Finance

I have a $175k pension that covers most of my expenses - can I afford to take more risk in the stock market?

Marc Guberti

Published: March 13, 2025 2:47 pm

Investing in the stock market is a common path to wealth that can outperform bonds, high-yield savings accounts, and other assets that are deemed as “less risky.” Some investors gradually reduce their exposure to the stock market as they get older, but one Redditor is thinking about doubling down.

The Redditor shared their thoughts in the Chubby FIRE Reddit group. The Redditor just resigned and earns $175k per year through a pension. It covers the Redditor’s fixed costs and about half of their total projected pre-tax spend. The Redditor asked if it is a good idea to treat the pension like bond income and put the rest of the portfolio into stocks. I will share my thoughts, but it is good to speak with a financial advisor if you can.

How Much Do You Have to Pull Out of Your Stock Portfolio Each Year?

The first question the Redditor should ask themselves is how much they have to pull out of their stock portfolio each year. While the pension covers most of the expenses, there is a gap. If you have a $5 million portfolio and only have to withdraw $25k per year, it’s easier to let the portfolio ride. However, if you only have a $1 million portfolio and have to withdraw $50k per year, it’s a tougher decision.

Stock investors should approach their investments thinking that they won’t have to touch any of their stocks over the next 5-10 years. This mentality can help you decide if it makes sense to put all of your remaining capital into equities or if you want a fixed-income source in addition to the pension.

Who Are Your Heirs? 

We don’t get any information about the Redditor’s portfolio size, which would make it easier to conduct a more personalized analysis. Furthermore, there is no information about the Redditor’s heirs. The Redditor can afford to be more defensive if they only have a $10 million portfolio and one child. However, Redditors with more children may benefit from staying in the stock market. It’s riskier, but any additional gains can result in a better nest egg for each of the children.

Why Do You Want to Incur Risk?

It’s important to grow your nest egg and make as much money as possible, but at some point, it becomes unnecessary excess. We don’t know the Redditor’s net worth, but most people with $20 million portfolios don’t really need to be invested in the stock market. It’s like how billionaires can retire today and still have enough money for multiple lifetimes.

Stocks can continue to grow your wealth, but you also endure the risk of market corrections and crashes. The Redditor should assess why they want to stay in the market and how it aligns with their long-term financial goals. If the Redditor can comfortably retire and live off their wealth, it’s even more important to establish why you want to take extra risk.

Some people view wealth building as a game once they have more than enough to support themselves. Other people want to provide large nest eggs for their children or afford more vacations. If you don’t have a good enough reason to stay in the stock market, it may be a good idea to trim some of your positions. However, people with a strong reason to stay in the stock market may want to stick it out, especially if they are receiving a $175k annual pension.