Q&A: Where should you put your extra cash? Here are some ideas

Dear Liz: At 82, I am selling my house and moving to a senior community. For the first time in my life, I will have a substantial amount of cash. Given my age and the fact that certificates of deposit and savings accounts are currently paying more than 5% interest, does it pay for me to start investing in other ways?

Answer: How you figure out what to do with your money is mostly the same whether you’re 28 or 82.

You start with your goal and your time horizon, or how long you have until you need the money.

For example, you may have to put aside some of the home sale proceeds to pay capital gains taxes if your home has appreciated more than the $250,000 that’s normally exempted from tax. Since the tax bill will be due within months of the sale, you shouldn’t take unnecessary risks with this cash. A high-yield savings account would be a good solution for any money you need to keep safe and liquid.

You also may want to earmark some money for long-term care. This goal is much more ambiguous, because it’s impossible to predict how much you’ll need or when. You may want to consult an elder law attorney, who can discuss your options.

Once you settle on a figure, you’ll want that money to be somewhere safe and readily accessible. Certificates of deposit that mature at different times could be an option, as could the high-yield savings account mentioned above.

If you have a goal that’s many years in the future, you could consider a mix of stocks and bonds. Stocks in particular offer long-term returns that historically beat inflation.

Most working people who want to retire will need to invest in stocks to accumulate and maintain a sufficient nest egg. They can take the risk of losing money in the short term because they have many years ahead for their investments to recover.

And that’s where your situation differs from that of a 28-year-old. The average life expectancy for an 82-year-old male is about eight more years, while the average life expectancy for an 82-year-old female is around nine more years, according to the Social Security Administration.

You may have enough time left to ride out a bad market. But if you don’t have to take such risks to achieve your goals, consider playing it a bit safer.