Carrie Schwab Pomerantz
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Dear Carrie: I only have about $21,000 saved and I am headed into a way-too-early retirement. Should I be investing aggressively to make up for lost time? --A Reader

Dear Reader: In the financial world, we often talk about the importance of aggressive investing for long-term growth. But for lots of investors in lots of situations, aggressive investing is not the right strategy. And I must say, it certainly seems that you fall into that category.

I realize you're in a tough spot, facing an early retirement with very modest savings. And your instinct -- to grow that money -- is understandable. But I don't think you should risk even a small portion of your $21,000 in an aggressive investment.

People like to say things like "risk and reward go hand in hand," which is true. But it's also true that risk and (SET ITAL) loss (END ITAL) go hand in hand. Investing in stocks can be a good risk for people who either have a long-term time horizon (at least five years, preferably more) or who can afford to take a loss. But that's not you.

So my advice is to think of your $21,000 as a life raft -- for emergency use only. Keep it safe. Put it in an insured checking, savings or money market account, or invest it in some short-term certificates of deposit. Don't put it at risk in the markets.

MAKING ENDS MEET

Having a nest egg should be comforting, and ensuring it is protected even more so ("I know I've got $21,000 in reserve"). But that does not address the issue of how you'll make ends meet as you head into "a way-too-early retirement."

So what to do? Obviously, if at all possible, you should postpone your retirement, even if it means taking a lower-paid or part-time job. Some income is clearly better than none and could well postpone the day you might need to tap your emergency fund. A job with health benefits is a huge plus. And if your income allows it, contribute as much as possible to a retirement plan like an IRA or a 401(k), but until you have a lot more assets and a clear sense of what your time horizon might be, don't invest in anything risky.

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Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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