What a “jumbo CD ladder” is — and why people build them
A jumbo CD is simply a certificate of deposit with a high minimum balance (usually $100 000, sometimes $250 000). A ladder is the strategy of splitting the money into several CDs that mature at regular intervals instead of locking the whole amount into one long-term CD.
| Classic 5-rung jumbo ladder | Amount | Term | Example APY* | Matures |
|---|
| Rung 1 | $100 000 | 1 year | 4.20 % | Apr 2026 |
| Rung 2 | $100 000 | 2 years | 4.25 % | Apr 2027 |
| Rung 3 | $100 000 | 3 years | 4.30 % | Apr 2028 |
| Rung 4 | $100 000 | 4 years | 4.30 % | Apr 2029 |
| Rung 5 | $100 000 | 5 years | 4.45 % | Apr 2030 |
*Representative credit-union jumbo rates on 26 Apr 2025. The blended, liquidity-weighted yield in year 1 is ~4.30 % and rises each year as higher-rate rungs roll forward.
How the ladder works step-by-step
- Day 0:
Deposit $500 000 across five CDs, one year apart (1-, 2-, 3-, 4-, 5-year terms). - At 12 months (Apr 2026):
Rung 1 matures.
• Withdraw the interest if you need it, or
• Roll the $100 000 principal into a new 5-year jumbo CD at the then-current 5-year rate. - Repeat every year:
Each April another $100 000 comes due, keeping one-fifth of the capital liquid and locking the rest back into the longest available (typically highest-yielding) rung.
After year 5, every dollar is in a 5-year CD, yet 20 % of the ladder is still maturing every year, so you never wait more than 12 months for access without penalty.
Why build a jumbo ladder?
| Benefit | Why it matters |
|---|
| Higher rates from jumbo tiers | Some banks/CUs pay 10–50 bp more once you clear $100 k or $250 k. |
| Blends yield and flexibility | You capture near-5-year rates on most of the money but still have yearly liquidity. |
| Reinvestment hedge | If rates rise, each rollover lets you ratchet yields higher; if they fall, four-fifths of the ladder is still locked at yesterday's better rate. |
| Penalty risk is smaller | Need funds early? At worst you break a single rung, paying a penalty on 20 % of the portfolio instead of 100 %. |
Practical tips
- Choose the right issuer mix. It's OK to mix banks and credit unions; just keep each below the $250 k FDIC/NCUA insurance cap (principal + interest).
- Mind minimums. Some “jumbo” definitions start at $95 000 or $175 000; make sure each rung meets the threshold or you'll drop into the lower rate tier.
- Line up maturity dates. Set them on or near the same day each year (e.g., use opening-day anniversaries) so the roll process is simple.
- Compare penalties. Credit-union jumbos often cap at 6 months' interest, while big-bank CDs can charge 12 months on 5-year terms; that difference matters if you might break a rung.
- Tax planning. Interest is taxable annually (even if you don't withdraw it). Laddering smooths the income stream rather than getting one huge 5-year payout.
- Automation helps. Many institutions let you pre-select “no-penalty transfer to savings” or “auto-renew to longest term” instructions—reducing the risk of a missed grace period.
When not to ladder
- You already know you'll need the entire sum on a specific date (e.g., a house closing) that's more than a year away but less than five—then a single-term CD matching that date is simpler.
- You need monthly cash-flow: a bond or a Treasury ladder—whose coupons pay twice a year—might suit you better.
- You expect rates to spike dramatically very soon; parking in a high-yield savings or a 3-month T-bill may be wiser until the move happens.
Bottom line: A jumbo CD ladder is a disciplined way to squeeze out the best long-term jumbo yields and keep annual access to one-fifth of your principal.