I just retired early at 53, but now I'm terrified about running out of money — how should I invest my $700K in savings for growth without being foolish?

Make sure your money is housed in the right accounts

If you’re 53 years old, it means you’re not yet old enough to tap an IRA or 401(k) without facing a 10% early withdrawal penalty. Usually, you have to wait until age 59 ½ to access money in these accounts penalty-free. There can be exceptions for 401(k) plans when you retire at 55 or later. But either way, at 53, you’re not there yet.

Make sure that some of your money is available to you outside of a 401(k) or IRA. A taxable brokerage account could do the trick, as could a savings account or CD ladder.

In fact, it’s important to have enough cash on hand to cover expenses once you’re retired. Most financial experts will recommend having at least a year’s worth of bills stashed away. This holds true whether you’re retiring at 53 or 73.

But at 53, it’s especially important, because at that stage of life, you’re still almost a decade away from being able to claim Social Security at the earliest possible filing age of 62. So you need accessible cash in case it’s the wrong time to liquidate investments.

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Continue to own stocks, but don’t go all in

Retirees are often advised to scale back on stocks, and that’s generally sound advice. You don’t want 95% of your portfolio in stocks at a time when you may be consistently selling off assets for cash to pay your living costs.

If you’re an early retiree, the same rules apply. You should keep some assets in stocks without going overboard.

You may decide that a 50/50 stock-bond split is appropriate based on your risk tolerance. However, if you’re able to live frugally and get by with less bond income, keeping more like 60% of your assets in stocks could allow your $700,000 nest egg to continue growing.

Stocks can also serve as income-generating instruments through dividends. To earn income from stocks, consider investing in established companies within stable industries that consistently pay reliable dividends.

Use real estate to your advantage

The $700,000 you have saved for retirement may represent only some of your financial assets. If you own a home you have equity in, you have additional options for generating income and preventing a scenario where you risk running out of money.

For one thing, you could always downsize, pocket your sale proceeds, and add that additional cash to your nest egg. If you sell a home for $500,000 with a $100,000 mortgage remaining, you have $400,000 to work with (not accounting for real estate agent fees). From there, if you’re able to buy a replacement home for $300,000, that gives you an extra $100,000 to add to your savings.

Another option is to keep a larger home but rent part of it out for income. This is doable if there’s a separate area of your home that’s conducive to privacy, like a finished basement a tenant can live in without intruding on your space.

But if neither of those are an option, dabbling in publicly traded REITs is another way to use real estate to your benefit as an early retiree. REITs are required to pay out at least 90% of their taxable income as dividends to shareholders, so they can be a pretty predictable source of income for investors.

Putting some of your savings into REITs could help that money last longer, because you can access your dividend income for bill-paying purposes while letting your principal investments continue to grow.

Ultimately, $700,000 isn’t a lot to stretch over up to 35 years. You may consider going back to work if you’re still able to for a few more years to add a little more padding to your savings. Regardless, you should plan to speak with a qualified financial adviser to ensure your money is working hard for you — not the other way around.

— with files from Jing Pan