Q: At 66 years old, where is the best place to put $10,000?
A: Choosing the right place to put your money depends on a variety of details besides just your age. The following are some of the key considerations:
- Are you still working? If you have enough income to meet your needs and plan to keep working for several years, you can probably afford to invest with a longer time horizon in mind because you won't need to draw on the money in the near future. On the other hand, if you are retired or close to retirement and will soon need to draw on some of your investments, you'll want to avoid volatile instruments such as stocks.
- Do you know when you will need this money? If there is a specific financial need you expect to come up in the next few years, you should invest this money in a way that will let you be certain of its value when the time comes.
- What other investments do you have? If you have no other savings, then at least some of this $10,000 should probably go into a guaranteed bank deposit account, so you will have it on hand for emergencies. If you already have a reserve of short-term deposits, then you could consider a longer-term investment program for this money.
Depending on your needs, here are some investment options, listed from least risky to most risky.
- Savings accounts/money market accounts. These accounts keep your money available whenever you want it, and are guaranteed up to $250,000. Unfortunately, these days they don't pay very much interest. Consider an online bank because they tend to pay a little more interest.
- Certificates of deposit. Ordinarily, CDs are a good way to earn a little extra interest if you won't need the money for one to five years. However, even five-year CD rates are now below 1 percent, so you may decide it isn't worth locking your money up in a CD.
- Bonds. Traditionally, bonds have been a good investment for situations in which you want your investments to produce income but don't plan on dipping into principal any time soon. Unfortunately, yields have gotten so low that there may be more risk than reward in bonds these days.
- Blended mutual funds. A mutual fund that mixes stocks, bonds, and short-term investments is probably the best way for you to get broad diversification with a $10,000 investment, if you have enough time to ride out some ups and downs in value.
- Stock mutual funds. If you already have a fair amount of short-term deposits or investments, you might want to direct this new money into stocks, as long as you are comfortable making a long-term commitment.
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