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CD Ladder Strategy: What is it and How to Build

A tactical savings strategy that helps you earn more without locking all your money up into one CD and one maturity date.

A CD ladder strategy is where you spread a lump sum of money across multiple CDs with different maturity dates. Certificate of deposit (CD) is considered a low-risk investment where your money is locked for a fixed period of time. The locked-in feature enables financial institutions to offer you higher rates compared to traditional savings accounts. These certificates can be offered from 30-days to 5-year maturities. Generally, the highest rate is given to longer-term CDs.

It’s a tactical savings strategy that helps you earn more without locking all your money up into one CD and one maturity date. With this strategy, you save money in a series of individual CDs with staggered maturity dates. For example, you save your money into a six-month, one-year, and 18-month certificate. That’s a CD ladder strategy.

What are the benefits of a CD ladder?

With the strategy, you’ll have funds become available on a rolling basis and benefit from earning more interest with longer-term CDs than in a short-term CD. And by spreading your money across multiple certificates, a CD ladder offers you flexibility giving you access to your money each time one of your CDs mature.

CDs offer a relatively safe investment option. The rate of return is guaranteed. However, you’ll sacrifice the possibility of better returns in investments such as stocks or index funds that also come with higher risks.

How to Build a CD Ladder

Let’s start with an example. If you have $10,000 to invest, then you can choose to divide your investments equally into 5 parts with different maturity dates.

  • $2,000 in a 12-month CD with 1.25% APY
  • $2,000 in a 24-month CD with 1.50% APY
  • $2,000 in a three-year CD with 1.75% APY
  • $2,000 in a four-year CD with 2.25% APY
  • $2,000 in a five-year CD with 2.50% APY

When the 12-month CD matures, open a new five-year CD. When the 24-month CD matures, open another five-year CD, and so on. In five years, you’d have only the higher-yielding, five-year CDs in your ladder – and every year, one of them would mature.

The idea is that you’ll have access to some of your cash year. It’s built with baby steps (shorter-term CDs) and as time passes, your ladder will evolve so that it’s primarily constructed of longer-term CDs (earning you higher APYs), but you still have access to cash each year.

The length of the CD ladder is entirely up to you. You’ll have the choice to open CDs with the same amount of money in each. But you can also open accounts with various amounts of money.

Where to open a CD Ladder

Shop around and compare certificate rates with online banks, local banks, and credit unions to find the best rates. You can choose to keep your CDs in one financial institution or have them in different places.


It could be a great fit for your short-term savings goals. Keep in mind, CDs are not ideal for emergency funds as money is locked in and may incur penalties for accessing the cash before maturity,

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