How to Create a CD Ladder

CD Ladder

Combine Great Rates with Consistent Cash Flow

Share Certificates, or a Certificate of Deposit at banks (both called a CD), are an excellent tool for those wanting to grow their savings as CDs typically have higher annual percentage yields (APY) than other savings accounts. A CD ladder helps you maximize those high APYs.

One of the downsides to CDs is that you can’t withdraw those funds before the term is up without being penalized and charged a fee. But CD laddering is a simple investment strategy to help you create an accessible cash flow while taking advantage of CDs’ high returns.

  • 🔄 Rolling Rewards: Mix short and long-term rates for max benefits.
  • 💳 Steady Access: Tap into funds as CDs mature.
  • 💪 Stay Flexible: Reinvest or withdraw without locking up all savings.
  • ⚖️ Manage Risk: Hedge against rate fluctuations.

What is a CD Ladder?

By opening different CDs with staggered maturity dates, you can safely invest your money while maintaining regular access to your earnings. Reinvest your money when a CD matures or keep your returns when needed. 

To create a CD ladder, all you do is split up the money you would like to invest into several CDs with different maturity dates (or different terms).

Building a CD Ladder

We’ll use some fake rates to use as an example. These rates are for demonstration purposes only and are not real CD offers, and we encourage you to view our most up-to-date CD terms and rates. Usually, CDs with longer terms offer better rates, but that isn’t always true.

Example Share Certificate (CD) Rates*

Annual Percentage Yield
1 year
Annual Percentage Yield
2 year
Annual Percentage Yield
3 year
Annual Percentage Yield
4 year
Annual Percentage Yield
5 year
Annual Percentage Yield

*This is an example table of rates used for demonstration purposes only. This should not be considered an actual offer of rates for Share Certificates. To view up-to-date terms and rates, click here.

Say you have $100,000 you want to invest. Here’s what your strategy might look like:

  • A 1-year CD with $20,000 at 1.00% APY
  • A 2-year CD with $20,000 at 2.00% APY
  • A 3-year CD with $20,000 at 3.00% APY
  • A 4-year CD with $20,000 at 4.00% APY
  • A 5-year CD with $20,000 at 5.00% APY

Typically with a CD ladder investment strategy, when the 1-year CD comes to term, you reinvest it into a 5-year CD or whatever term has the best rate. You would also reinvest the 2-, 3-, and 4-year CDs in 5-year terms when they mature as well. By the time your original 5-year CD reaches maturity, you will have 5-year CDs paying out every year.

With this strategy, you are earning the best rates while also periodically getting access to portions of your investment so you can reinvest or spend the funds how you see fit.

CD ladders are very flexible and don’t have to look like the above example. You can create CDs in 3-month increments, or put more money into CDs with better rates. Feel free to research the best rates and find terms that fit your financial goals. You can also use our CD calculator to figure out exactly how much money you can make with a CD.

Benefits of CD Laddering

  • Maximize your long-term earnings with CDs with the best APYs.
  • Get regular access to portions of your cash, allowing you to reinvest or keep your profits.

Disadvantages of CD Laddering

  • It can be complicated to keep track of all the maturity dates.
  • You may reinvest your money into CDs with lower returns if interest rates decrease over time.

CDs to Help Grow Your Savings

CDs are a good investment because they are safe, and you know how much money you earn at the term’s end. CDs may have lower returns that other investments like the stock market. Still, with other investments, earnings are inconsistent, and there is a risk of losing money.

CDs offer a low-risk investment with guaranteed returns insured by the National Credit Union Administration (NCUA) up to $250,000. CDs have their place in a balanced portfolio, helping you grow your funds at a steady rate. We invite you to learn more about the CD terms and rates we offer.