I run my own instance, the benefit is privacy and reliability. Everything is controlled on your own server. You also aren’t reliant on someone else running an instance that could go down at any time, either permanently or an outage. Been a problem with Lemmy.ml recently.
Depends how many people you are hosting for. But what you describe seems overkill, I think Lemmy.ml just upgraded to a 6 core cpu and 32gb of ram and they have 30k+ members.