Jumbo CD vs High-Yield Savings: Which is the Best Place to Store $100k?
If you're looking to stash some cash in a less risky venture, I'll break down two of the best accounts to consider.
Question: I'm retiring in a few years and want to reallocate $100,000 to a less risky investment. Which savings account would work best for me?
Answer: The first thing you should consider is inflation. With gas prices rising and food prices doing the same, the smart aim is to find a savings account earning above 4.00% APY.
Luckily, several solutions keep you ahead of inflation while earning thousands of dollars annually. Two of the most popular choices are jumbo CDs and high-yield savings accounts (HYSA). Which one would work best for you? I'll break down when to use each and which one earns you the most cash.
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A flexible option that keeps your cash accessible
The first factor you should consider is whether you'll need access to any of the $100,000 within the next year. If you do or want the flexibility to reinvest in something else in a few months, I recommend a high-yield savings account.
What I like about them is that you can earn healthy rates of up to 4.20% APY with online banks with no fees. This allows you to maximize your cash in a quick window. You'll also receive FDIC insurance with many banks, protecting your investment up to the first $250,000 deposited per account holder.
Here's my recommendation:
Why now: The Iran War increased gas prices by 20%, so it's safe to say the cost of everyday goods will rise. David Payne of the Kiplinger Letter notes that if there is no Iranian ceasefire, expect inflation to end the year around 4.0%.
This is why Newtek Bank's savings account is a smart move, because it will keep you ahead of rising costs.
A commitment worth sizable gains
Another option to consider is a jumbo CD. It has many of the same rules as a regular CD, in that you can't withdraw your deposit before the maturity date, unless you want to pay an early-termination fee amounting to a few months of earned interest.
Moreover, as its name implies, jumbo CDs are reserved for larger deposits — think $50,000 to $100,000 minimums. The good news for investors is that these CDs have quicker maturity (terms range from six months to one year), making them a good short-term strategy if you want to reallocate some retirement funds to less risky ventures.
Use this Bankrate tool to compare and find the best CD options for you:
Why now: With inflation high, rate cuts are likely off the table for the rest of the year. In fact, if inflation continues to rise and remain sticky, there's growing momentum that the Fed could hike rates at least once by the end of the year.
Rate hikes can lead to higher savings rates. So, choosing a short-term option now might put you in prime position to capitalize on even higher rates when your CD matures.
Which savings account earns me more?
Here's how much you can earn with each savings option if you deposit $100,000:
Account | Type | APY | 1-year earnings | Early withdrawal penalties |
|---|---|---|---|---|
HYSA for one year | 4.20% | $4,289.20 | No | |
11-month jumbo CD | 4.25% | $3,889 | A few months of interest earned |
Using this example, a jumbo CD will earn the most money over time. It's also the ideal option if you don't have cash flow issues, as it features a fixed interest rate, allowing you to maintain higher earnings even with inflation rising.
However, the earnings difference isn't substantial. Either way, you're earning thousands effortlessly in a year with access to your cash. Therefore, your cash liquidity and short-term goals should direct the course to help you choose the best option for your needs.
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