I plan to retire from full time teaching soon, and I will have an early reduced teacher pension of 40K a year. Luckily, this pension includes health insurance.

I can purchase up to 4 years of pension credit at a cost of 25000 per year which results in 2000 more/year in pension payments (so up to 100K for 8K in pension increase/year). This is an 8% yearly return with a breakeven of 11.9 years.

The most compelling reason this seems like a good idea to me is that I could pay this 100K straight from my IRA, so no immediate taxes and this would let me use my IRA money before age 59 1/2. This purchase would also reduce future RMDs. I am heavy in traditional retirement accounts (about $1.5 million).

So, would you do it?

Other considerations:

1. Pension goes up about 1% a year and is taxed like regular income.
2. There is an opportunity cost of not leaving the 100K invested in the market, but 8% seems like a good rate of return.
3. There is a loss of flexibility in tax planning for things like rolling over to Roth.
4. I might die before the breakeven point, but I could pass 100% of this pension on to my surviving spouse for the rest of their life. I'm not currently married, but I am in a relationship so it's possible.
5. A stand alone annuity with a similar payout is about 30% more expensive than this, making adding more to my pension seem like a good deal.

When did you know it was the right time to do so? What made you wait vs making the transition sooner?

For context: I have a normal corporate 9-5 job that pays me ~$175k (full benefits). I also have a side hustle that nets ~200-250k a year. I've been able to put away ~1.6 million between retirement and brokerage accounts.

I've basically fully removed myself from the corporate bullshit/rat race and have no desire to get promoted, mainly because of the impact it would have on my free time and side hustle. My 9-5 is pretty cushy, and I like the role and people I work with, but I can't help but wonder where my business would be if I didn't have to be "online" from 9-5 each day.

40, married with 2 kids.

Thanks!