Share certificates have long been a favored investment option for those looking for a secure and steady place to grow their funds. Certificates typically offer higher annual percentage yields (APYs) compared to most traditional savings accounts and provide fixed earnings over a set period (term), ensuring a dependable income stream. However, certificates require investors to lock in their funds for the entire term, limiting flexibility. This is where certificate ladders come in.

Certificate ladders operate on a simple principle: instead of investing in a single certificate with a fixed term, you can distribute your funds across multiple certificates with different, staggered, maturity dates.

Advantages of Certificate Ladders

• Increased flexibility: The primary advantage of certificate ladders is flexibility. By staggering the maturity dates, you can have access to a portion of your funds more frequently instead of tying up your savings for one long duration.


• Liquidity: Unlike a single long-term certificate, a ladder provides a level of liquidity. You can access a portion of your invested funds without incurring penalties in the event of an emergency or an unexpected financial need. This flexibility offers peace of mind and allows you to reinvest or use your funds as needed.


• Mitigate reinvestment risk: Certificate ladders allow you to manage the reinvestment risk. Reinvestment risk refers to the concern that, when a fixed-income investment matures, the available rates may be lower than the original investment’s rate. With certificate ladders, you can mitigate this risk by reinvesting a portion of your funds as each certificate matures. This feature is especially beneficial in today’s environment of fluctuating rates, as it allows you to reinvest a portion of your funds should higher rates become available. Conversely, if rates decline, only a fraction of the portfolio is affected, thus minimizing the overall impact. By strategically choosing different certificate terms, you can potentially earn more interest than if all your money were deposited in a single certificate.

Ready to get started?
Creating a 6-month certificate ladder is a great way to balance earning potential with liquidity. Here’s a step-by-step guide to help you set it up:

1. Determine Your Total Investment Amount: Decide how much money you want to invest in total.


2. Divide Your Investment: Split your total investment into equal parts. For example, if you have $12,000 to invest, you could divide it into four $3,000 investments.


3. Open Initial Certificates: Open share certificates with staggered 6-month maturity dates. For example:
   • $3,000 in a 6-month certificate
   • $3,000 in a 12-month certificate
   • $3,000 in an 18-month certificate
   • $3,000 in a 24-month certificate


4. Reinvest Upon Maturity: When the first 6-month certificate matures, reinvest it into a new 24-month certificate. Continue this process every 6 months as each certificate matures.


5. Maintain the Ladder: By continuously reinvesting each matured certificate into a new 24-month certificate, you ensure that you have one certificate maturing every 6 months, providing regular access to your funds.

Justice Federal currently offers a wide range of certificate terms with higher-than-average rates that are perfect for building your certificate ladder.

Visit jfcu.org/Certificates contact a Financial Service Representative to learn more or open today.
OPEN NOW

*APY= Annual Percentage Yield. APY is subject to change without notice. Rate effective October 1, 2024. Minimum balance of $500 required. A penalty will be imposed for early withdrawal from certificate accounts. Fees or other conditions may reduce earnings. Rate includes a .10% (10 basis point) Justice National or Beyond the Badge Checking Account Relationship rate increase on the new certificate. Certificate rate increase effective by end of day on date of opening or renewal. Justice National or Beyond the Badge account and certificate must be under the same account number.