If you have a big The amount of savings and want to increase it – but you don’t want to lose any money for high-risk investments – a jumbo certificate of deposit may be the answer.
Jumbo CDs function just like any traditional CD: you agree to hold your funds on deposit for a fixed period, and in return, you are guaranteed your principal, plus interest.
“Typically, the time period ranges from three months to five years or more,” says retired financial analyst and RetireGuide.com expert Toby Walters. “If you leave your money in the CD for that period then you guarantee a rate of return.”
In general, the longer the period, the higher the interest rate you get. However, if you withdraw your funds early, you may be subject to an early withdrawal fee, which can cancel out any interest income.
So what makes it “jumbo”? The differentiating factor of a jumbo CD is not the interest rate or the length of the term, but the deposit amount. Jumbo CDs typically require a minimum opening deposit of $ 100,000, although some require less.
Pros and Cons of Jumbo CDs
Keeping your money in a jumbo CD can help you earn a little extra interest for a down payment from home, a big vacation or other goal. However, jumbo CDs are not for everyone. Before opening a jumbo CD, consider the pros and cons.
- Very low risk. The biggest advantage of putting your money in a CD is that you can earn some interest without exposing it to any risk. Certified Financial Planner, Zachary A., with Summit Financial Consulting. Bakner said that as long as you meet the conditions of the account, you are guaranteed the interest rate offered by the bank. Funds are also protected by the US government Up to $ 250,000, As long as they are deposited with a federally insured bank or credit union.
- Better rate. Jumbo CDs offer higher interest rates than regular CDs, although you may also have to commit to a period of three to five years to secure the best rates. “For investors with large investment portfolios, including stocks, jumbo CDs can provide protection and comfort when the stock market is volatile,” says Walters.
- Low growth. Even though you can earn a higher rate with a jumbo CD, the interest rate on deposit accounts is quite low across the board. There is a chance that your earnings will not be enough to beat inflation. Furthermore, although jumbo CDs offer higher interest rates than traditional CDs, the difference is negligible on average. “Walter says,” The difference in annual percentage yields between regular and jumbo CDs is about 0.01%.
- Close. Jumbo may not be a great option for CDs Emergency savings Or you will need the money soon. To earn the specified rate, you have to keep your money on deposit for the full duration. “There is normally a penalty or surrender charge if you try to use the money before the end of the specified period,” says Batcher.
Warning about jumbo cd
Jumbo CDs provide security and stability for your savings. In general, this is a good thing. But depending on your goals for the money, a jumbo CD may be very Is safe.
If you plan to hold on to your savings for a few years or longer, you can get better returns by investing less risk Bond or exchange traded fund. Walters says, “You’re tied into the interest rate offered by jumbo CDs, so if interest rates are going up normally, your money will be locked into jumbo CDs offering a lower interest rate.” This is especially true if you opt for a period of three to five years. If you need access to your money earlier than expected, you may lose your nominal earnings in early withdrawal fees.
Also keep in mind that because it is a jumbo CD, large amounts of your money may be missing.
Finally, you should be careful about placing too much money on deposits. The Federal Deposit Insurance Corporation insures up to $ 250,000 per depositor, per institution. So if you have two accounts with a combined balance that exceeds $ 250,000, the money may be at risk. “If the bank goes bankrupt, you may not receive further interest, and your initial investment may be at risk,” says Batcher.
Best jumbo cd
“Jumbo CDs may be suitable for those seeking protection and knowing that they will not need money for some time,” says Walters, adding that jumbo CDs can be used by investors who own Want to counteract the volatility of shares in investment. Portfolio.
The best is offered by Jumbo CD Credit Union, Where the CD is called a share certificate. To join a credit union, you must meet the qualifications for membership. Below are the top Gembo CD rates available today, as well as how to become a member of the organization providing them.
Superior Choice Credit Union
rate: 1.4% annual yield
Who can join: Membership is open to those who live or work in certain counties in Minnesota and Wisconsin. Members of the American Consumer Council are also eligible to join.
Wings Financial Credit Union
Who can join: Membership is open to individuals who live or work in the following areas (or have a family member who does): qualified Minnesota or Wisconsin counties; Seattle-Tacoma, Washington, metro area; Detroit metro area; Orlando, Florida, metro area; And the Atlanta metro area. If you or you are an immediate family member airlines, government agencies working with the aviation industry, or work directly at the airport with air freight, air courier or air transport, or are a member of Wings or Wings Financial, So you too can join it. Foundation.
SchoolsFirst Federal Credit Union
Who can join: Membership is open to those who are part of the California educational community, including employees of public elementary and secondary schools, education departments of private elementary and secondary schools listed in school directories, community colleges and more. If you are retired from an eligible school and are receiving a pension or annuity from that unit’s retirement program, or you are an immediate family member of an existing SchoolFirst FCU member, you may also join.
Who can join: Anyone who lives or works in California is eligible to join. Non-citizens can also join if an immediate family member is a current Golden 1 member, or if they work for one of its 1,000 select employee groups.
Navy federal credit union
Who can join: Service members and veterans from all branches of the armed forces are eligible to join, as are members of their families. The Department of Defense civilian employees may also be involved in this.