Your Guide to Investing Extra Cash in Retirement

Just because you stop working doesn't mean your money should. You may find yourself in a financial situation where you have the money to continue investing during retirement. Here's how to make the most of your extra cash.  

Keep Saving for Retirement 

Depending on your age at retirement and your overall health, you may need to prepare for a retirement that could last 25 years or more. You can still keep contributing to traditional and Roth IRAs.  

There’s no longer an age limit for putting money in these accounts, so they could be one of the best investments for retirees. However, you must have earned income to contribute to an IRA, and there are annual contribution limits.  

Reinvest Your Required Minimum Distributions 

With retirement plans like 401(k)s and 403(b)s, you have to start withdrawing money at age 73 (75 if you were born after 1960). These withdrawals are called required minimum distributions (RMDs). You can choose to reinvest this money. If you have earned income, you may even be able to invest it in a traditional or Roth IRA. 

Plan for the Later Retirement Years 

It’s common for your expenses in retirement to follow a U-shaped pattern: 

• Early retirees often spend a lot on travel, hobbies, concerts, sporting events and other things they didn’t have time or money for when they were younger.
• Middle retirees may see their expenses drop as they check things off their list and begin to slow down.
• Later retirees may find that health care and long-term care costs mean their expenses climb again.

If you have extra money during your early or middle retirement, you may want to look into cash-value life insurance plans or guaranteed income annuities, which could provide the funds you need later in retirement. 

Pay Off a Mortgage 

Depending on your mortgage interest rate, the impact of the mortgage interest deduction and other factors, you may want to use excess cash in retirement to pay off a mortgage.  

Keep Cash in Liquid Accounts 

Maybe you have cash you don’t need right away, but you’re not sure what the future holds. You may want to stash it in an interest-bearing savings account so you can withdraw it right away if you need or want to. 

To earn a little more interest, you may want to put the money in certificates of deposit (CDs). You can “ladder” CD investments to balance your interest with your access to money. 

For example, suppose you have $25,000 to invest. Instead of investing it all in one CD, invest $5,000 in five CDs that mature in one, two, three, four and five years. When the first one matures, you can determine if you need access to that money or you can reinvest it in a five-year CD. Your original two-year CD will be one year away from maturing, so you’ll have a chance to re-evaluate then. You can repeat your reinvestments every year. 

Spread the Wealth  

If you have all your needs and wants covered, many retirees turn to their family members. This may take the form of cash gifts to their children or other family members or contributions to 529 savings plans for education expenses. 

Talk to a Professional 

Whether you’re saving for retirement, building a retirement budget or figuring out what to do with extra cash, it can help to get advice from someone with experience. At Farm Bureau, we help people manage their retirement through every stage. Reach out and start the conversation today.