Investment Ideas When Retiring Early

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Hey Taylor - I’m in my mid-50s and am about to retire. I have a good amount of money saved up and feel comfortable leaving work, but I’m wondering if you have any advice for handling my finances once I’m done working. - Bradley

Hey Bradley - Does it feel great? I’ve got a lot of working years ahead of me, but I imagine it must feel oh so sweet to step out of the workplace a few years earlier than your friends. Congratulations!

To your question, you have to tighten things up when you first step into retirement. That’s not to say you have to become painfully frugal, but you need to get conservative in some areas while still allowing money room to breath in other ways. For you, patience will be important as you wait for social security and IRA distributions. Nothing wrong with retiring before those payments kick in, but you have to have a solid spending plan since your own funds will be responsible for covering all your bills.

Start by making sure you don’t have money in risky markets. Certain tech and energy sectors have lots of appeal but too much risk for a person who needs to start living off their investment money. Some people seem to think retirees have to pull everything out of the stock market, but I don’t agree with that philosophy. Reconfigure your portfolio and cut back on the more volatile positions, but don’t be afraid to leave money in there to work. I am a huge fan of high quality (blue-chip type) dividend paying stocks so if you have some of those, I'd hold onto them.

If you have the money, time and energy, I’d strongly consider investing in a rental property. That’s a good way to diversify and increase your wealth, while potentially bringing in enough revenue to cover some of your own costs. A good rental property has helped many people transition from employee to retiree, especially those like yourself, who are a little ahead of the curve and might otherwise get bored.

Beyond that, you can look into the unexciting but safe options, such as bonds, CDs and high-yield savings accounts. If you have a healthy amount of capital and aren’t ready to commit to anything that ties those funds up, see what kind of savings rate you can get and lock your cash up somewhere safe for a bit. As long as you aren’t blowing through cash, you might find the interest payments are pretty substantial.

For a few more ideas and details, check out my recent post at on this very subject. It sounds like you’re already pretty good with money, so stay smart and I think you’ll have a very happy retirement.