How to invest your money after retirement — and make it last through your golden years

You’ve spent a good amount of time being told to save for retirement. Now that you’re finally enjoying retired life, your investing strategy may need to change. After all, you’re using most of your funds to live, like for home payments or increasing healthcare bills. But that doesn’t mean investing has to stop once your main source of income has.

While spending is a big financial part of retirement, it’s not the only part. Here’s how to invest your money after retirement so it can continue to last you through your golden years.

1. Calculate your retirement expenses

When you were saving for retirement, you were estimating how much you need to save based on expected needs. Now that you’re in retirement, those needs might have changed.

To calculate your monthly retirement spending, include:

• Your home payment — rent or mortgage

• Property taxes and homeowner’s insurance

• Utilities and maintenance

• Groceries and dining out

• Auto loans and car insurance

• Gas and regular vehicle maintenance — or public transportation, if it applies

• Health insurance and ongoing medical costs, including medications and supplies

• Life, long-term, disability and other types of insurance

While these are needs for most folks, your expenses could include other things. For instance, if you’re paying for a child or grandchild’s education, that might also be on your list. Or you might want to include vacation expenses if you plan to travel more, now that you have the time. You might also donate to worthy causes or enjoy ongoing gifts, entertainment and hobbies.

After you calculate your expenses and your retirement income, you can figure out how much money is left over for investing in retirement.

2. Withdraw from your retirement funds wisely

If you have a few different retirement accounts, you may need to look at all of them to see which ones allow you to withdraw funds, how much and when you can. For instance, some accounts have required minimum distributions (RMDs) where you’re required to take out a minimum amount of funds from your account every year, starting at ages 72 or 73.

These distributions are necessary — and, in some cases, you could face fees if you don’t make them. Conventionally, you’ll tap into your taxable accounts first, and then move on to tax-deferred accounts and then tax-free accounts last. There are no tax implications when withdrawing from accounts like Roth accounts, so that money can continue to grow tax-free, and you can use it later on.

Dig deeper: 401(k) withdrawal rules: What to know before cashing out — and how to avoid penalties

3. Open a high-yield savings or money market account

If you don’t already have a high-yield savings account, it might be time to open an HYSA. These accounts are earning around 5% APY right now and, unlike the stock market, you aren’t set to lose any money when it’s in this type of account. It’s a safe place to store your money, especially if you have to take out RMDs and need a place for that cash.

You can also use a money market account, which comes with check-writing capabilities and a debit card while still earning high interest. Even though you’re taking money out regularly from this account, what’s left in there can continue to earn interest.

You can also try a certificate of deposit — or CD. This lets you earn interest on a lump-sum deposit for a set amount of time, ranging from 6 months to 5 years. But keep in mind that you can’t touch that money during those terms or you could pay a fee. Only take this route if you have the money to move into the account, maximize APY, and don’t mind leaving it alone for a while.

Dig deeper: High-yield savings account vs. money market account: Which is best for growing your savings?

4. Change your investment strategy

Yes, you can still invest while you’re in retirement. But how your money gets invested will look different from when you were working.

The younger you are, the riskier your investments can be. That’s because earlier in life, you can afford to take risks in your investments, and the longer you stay the course, the more likely you are to reap those rewards.

The older you get, the more conservative your investments start to head. That means moving away from individual stocks to bonds and cash investments. While you might earn more with stocks, there’s a chance the market is in a downturn when you need to withdraw funds. That means you could be earning less, and your money won’t go as far compared to other types of investments in your portfolio.

You can also try diversifying your portfolio to include different types of less-risky investments. For instance, dividend stocks that offer regular payouts tend to be much more stable than other types of stocks.

5. Try income annuities

An income annuity is when you make a payment to an insurance company in return for regular income payments. It’s not life insurance, and your family doesn’t get a payout when you die. But annuities do guarantee payments for life.

When you complete your annuity application, you can select immediate or deferred payments. This means you can get payments right away or defer them until a later date. You’ll also have the choice of a fixed or a variable annuity. A fixed indexed annuity pays out funds based on stock market performance. Your principal investment isn’t affected, but you could earn gains on top of it. This is one of the safest annuities available.

A variable annuity offers a lot more investing options, and there’s no guaranteed fixed amount. This means based on market performance, your payments could fluctuate. It also means you could lose money.

What to keep in mind when investing after retirement

Retirement doesn’t mean that investing stops. Instead, you'll want to shift your investing strategy, considering a few key rules of thumb that include:

• Keeping more cash in reserves rather than illiquid investments.

• Making sure your portfolio is diversified.

• Taking proper measures for lowering your tax risk.

• Creating or updating an estate plan with an estate lawyer or another financial professional.

When planning for retirement or maintaining your finances on a fixed budget, talk with a financial planner who can help you plan out your specific retirement needs.

Frequently asked questions about investing post-retirement

Learn more about investing while retired and protecting your money.

Where do retirees invest their money?

Retirees tend to invest their money in a mix of different retirement accounts, whether that’s 401(k)s, IRAs, taxable brokerage accounts and even safe, reliable deposit accounts, like high-yield savings accounts, CDs and money market accounts. There’s no one-size-fits-all method for where retirees invest their money, so what works for others might not always work for you.

How do I invest if I've already retired?

When investing in retirement, you can explore low-risk assets, like annuities, bonds, CDs, savings accounts and even dividend stocks. Rather than putting all your money into high-risk stocks, make sure to diversify your portfolio across a range of investment types.

What is a good monthly retirement income?

What you’ll need in retirement is highly personalized based on your lifestyle, financial habits and needs. Start by calculating what you’ll need to pay for in retirement, including your home, utility, health care and food. Include other expenses like travel, entertainment and gifts, as they apply. Even after you retire, you might need to adjust your budget to accommodate unexpected expenses, changing medical needs and other responsibilities.

About the writer

Dori Zinn is a personal finance journalist with more than a decade of experience covering credit, debt, investing, real estate, student loans, college affordability and personal loans. Her work has been featured in the New York Times, the Wall Street Journal, Yahoo, Forbes and CBS News, among other top publications. She loves helping people learn about money.