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The CD Ladder Strategy Explained
A CD ladder splits your savings across multiple CDs with staggered maturity dates — giving you regular access to portions of your money while still earning the typically higher rates CDs offer.
How a CD Ladder Works
For example, split $20,000 into four $5,000 CDs with 1-year, 2-year, 3-year, and 4-year terms. As each matures, reinvest it into a new 4-year CD — after 4 years, you'll have a CD maturing every year going forward.
Sample CD Ladder
| CD | Amount | Term |
|---|---|---|
| Rung 1 | $5,000 | 1-year |
| Rung 2 | $5,000 | 2-year |
| Rung 3 | $5,000 | 3-year |
| Rung 4 | $5,000 | 4-year |
Benefits of a CD Ladder
Regular access to a portion of your funds, exposure to varying rate environments over time (reducing the risk of locking all your money at one rate), and typically higher overall returns than keeping everything in savings.
Common Mistakes
Building a ladder with terms too far apart, leaving long stretches without any access to funds, or forgetting to reinvest maturing CDs promptly, missing out on continued returns.
Frequently Asked Questions
There's no strict minimum — many online banks have no minimum deposit for CDs, meaning you can build a ladder with any amount, even relatively small sums split across a few terms.
Not necessarily — you can build a ladder across multiple banks to capture the best rate for each specific term, though managing one bank is simpler if the rates are competitive across the board.