Jumbo CDs: How to Make the Most of Your Investment

Introduction

When you’re an investor with a high net worth, it’s even more important to preserve and grow your wealth. While stocks, bonds, mutual funds, real estate, and other common investments can provide a nice return, they’re also potentially risky. More volatility means there’s a greater chance of big gains and big losses.

So in a diversified portfolio, it’s a good idea to have some safer investments as well. These include high-yield savings accounts and certificates of deposit (CDs), which are usually FDIC insured if opened at a bank. Because of that layer of security, a CD is often referred to as a low-risk investment.

What Are Jumbo CDs?

To understand jumbo CDs, we first have to look at what a certificate of deposit is. And that’s an investment product that typically offers a higher interest rate than a savings account — as long as you agree to deposit a certain amount of money and leave it untouched for a set amount of time. The length of time you need to leave your money in a CD is called the “term,” and if you take out funds before the term ends, you’ll usually have to pay an early withdrawal penalty.

When the term is over, your CD has “matured,” and you can access your deposit plus the interest you earned. But there’s a difference between a high-yield jumbo CD and a regular CD. While a regular CD could have a small minimum deposit requirement, a jumbo CD requires a much higher minimum deposit — usually $100,000 or more.

Benefits of Investing in Jumbo CDs

The main benefit to a CD is the security and predictability it offers. You know that if you put your money in and don’t touch it for the full term, you will make the stated interest. There’s no second-guessing whether you’ll wake up tomorrow and find it worth half what it was.

A jumbo CD also usually has a higher annual percentage yield (APY) than traditional savings accounts or standard CDs. So it can be the best type of investment if you believe that “slow and steady wins the race.”

How to Choose the Best Jumbo CD

Choosing the best jumbo CD for your needs, and securing the best returns on your money, requires a bit of research. And you’ll want to consider several important factors.

• Interest rate: First and foremost, the amount you’ll make depends a lot on the APY, since just a small difference can translate to thousands of dollars in return. CD rates are determined from a number of criteria, so it’s best to shop around for the highest one.
• CD term: Next, think about how long you’re willing to lock up your money. While a longer term may come with a higher APY, you don’t want to wind up paying a penalty because you needed access sooner than you thought.
• Minimum deposit: Besides how long you have to leave your money, it’s important to consider how much money that will be. If a jumbo CD requires a higher minimum deposit than you’re comfortable with, it won’t be the best choice for you. 
• Penalties: Once you’ve considered the term and minimum deposit, take a look at what the early withdrawal penalty would be if you change your mind or run into an emergency. This penalty will often be worth a certain period of interest, but the specifics vary greatly.
• Insurance: If you get your CD at a bank, it will likely be FDIC insured. If it’s from a credit union, it should be covered by the National Credit Union Administration (NCUA) instead. But either way, you’ll find conditions and maximums — like up to $250,000 of coverage per account owner, per financial institution.

Strategies for Maximizing Returns with Jumbo CDs

If you like the idea of a jumbo CD but you’d rather not lock up too much money for too long, you can consider a few different strategies. They all involve opening multiple CDs, so unless you have several hundred thousand to invest, they may work better with standard CDs.

CD ladder

When you want the best of both worlds — bigger returns and the ability to access funds sooner — you can build a CD ladder. This strategy involves opening multiple CDs with staggered maturity dates.

For example, if you have three CDs with terms of one year, two years, and three years, you don’t have to wait the full three years before you’re eligible to withdraw without penalty. You simply cash out the one-year CD when it’s mature, or reinvest into a fourth CD.

CD barbell

Similar to a ladder, a CD barbell involves more than one CD with different maturity dates. But instead of having medium-term options in the mix, a barbell only combines short-term and long-term CDs.

Most commonly, you would open two CDs — one with a shorter one-year term, and the other with a longer term of three years or five years.

CD bullet

While ladders and barbells work by opening all your CDs at the same time, a CD bullet takes the opposite approach. It involves opening different CDs at different times, typically all with a similar maturity date.

For example, you could open a three-year CD the first year, a two-year CD the second year, and a one-year CD the third year, and then cash them all out at the three-year mark.

Risks and Considerations

CDs might be categorized as low-risk investments. But you still need to make some important considerations before opening a jumbo CD.

• Insurance: Even though your CD is most likely insured by the FDIC or NCUA, that only kicks in if the institution fails, and it’s not for an unlimited amount. Coverage is generally up to $250,000 per account owner, per ownership category, per financial institution. So if you have one or more CDs with one bank, and they add up to more than $250,000, consider using a different bank for the next one, or adding a beneficiary to your account.
• Cash flow: When you’ve got a chunk of money sitting around, locking it into a CD to grow might seem like a good idea. But if you don’t leave yourself with enough funds to cover emergencies or expenditures during your CD’s term, you could find yourself in financial trouble, even though you own a valuable asset. So be sure you have enough cash flow to live on before committing.
• Opportunity cost: When you have a CD, you know exactly how much you’ll make and when. But what if another opportunity comes along to earn a bigger return when that money is locked in the CD? It’s important to be completely satisfied with the rate, term, conditions, and minimum deposit requirements — and know you won’t have buyer’s remorse — before signing on the dotted line.

How to Open a Jumbo CD Account

If you’d like to open a jumbo CD account, here’s the step-by-step process and requirements.

1. Find the jumbo CD you’re interested in opening.
2. Check if you can open the account online. Most financial institutions offer this option. Otherwise, you’ll need to go into a physical bank location.
3. Fill out the application form with your information. You’ll likely need to supply your name, birth date, Social Security number, email address, phone number and physical address.
4. Set up your login info, including username and password, so you can access your account details at any time.
5. Connect a bank account to fund the account. If you’re doing it in person, you can use cash instead.
6. Make sure you have the required minimum deposit amount, and send the money or provide the cash.

That’s it! Once you’re set up and your account is funded, it will start earning interest at the promised rate. You can check on your balance whenever you like by logging in to your account.

Success Stories with Jumbo CDs

Let’s look at a few examples of what these situations may look like.

1. Paying for college 
   Mary has a son in middle school, and wants to save up to send him to college. She puts $100,000 into a 5-year jumbo CD that pays a 5% APY. During the term, it earns $27,600 in interest. When Mary’s son graduates high school, the CD is mature, so she withdraws it with interest. The $127,600 is more than enough to pay for all four years of schooling.
2. Buying a home 
   John wants to buy a house within the next two years. He puts $100,000 into an 18-month jumbo CD with a 4.5% APY. During the term, he earns $6,800 in interest, which covers most of his closing costs.
3. Diversifying assets 
   Tom has been playing the stock market for several years, but he’s concerned about volatility and wants more security in his future. He pulls out $150,000 from his stock portfolio and invests it in a 3-year jumbo CD with a 4.8% APY. At the end of the term, he’s earned $22,650 to invest back into stocks while moving the $150,000 into a high-yield savings account.

Future Trends in Jumbo CD Investments

Most reliable sources predict that CD rates will drop, at least throughout 2025 and 2026, because of rate cuts from the Federal Reserve. Since you always want to lock in the highest returns possible, it’s a good idea to secure a CD earlier than later if you plan to get one.

Having said that, potential economic conditions are never guaranteed — it’s always an educated guess at best. That’s why it takes a high level of analytical skill, technical knowledge, intuition and emotional resilience to become a good futures trader.

Bottom Line

You may have heard the common advice to never invest more than you can afford to lose. With CDs, the advice is more along the lines of never investing more than you can bear to be without for a year or two. But once the agreed-upon term is complete, you’re pretty much guaranteed to have the amount of money you expected.

If you hold riskier assets like stocks or bonds, CDs can be a great addition to your investment portfolio. They provide predictable returns and security for your funds. So they complement any riskier assets you might hold, ensuring your finances won’t get wiped out.

There are lots of options for regular and jumbo CDs, with jumbo variants often offering better terms and higher returns — if you have the required funds and you’re willing to lock them in. If you’d like to explore some of your options, take a look at Credit One Bank’s High Yield Jumbo CDs.