CD Laddering: Higher Returns + Regular Access
A CD ladder gives you the higher rates of long-term CDs with the flexibility of regular access. Here's how to build one.
How a CD Ladder Works
One CD matures every year → regular access + long-term rates
What Is a CD Ladder?
A CD ladder is a strategy where you split your money across multiple CDs with staggered maturity dates. Instead of putting $25,000 into one 5-year CD, you put:
- $5,000 in a 1-year CD
- $5,000 in a 2-year CD
- $5,000 in a 3-year CD
- $5,000 in a 4-year CD
- $5,000 in a 5-year CD
Every year, one CD matures. You can use that money or roll it into a new 5-year CD. After 5 years, you have a full ladder with one CD maturing annually—giving you yearly access while earning long-term rates.
Why Ladder Your CDs?
1. Regular Access
With a ladder, you're never more than one year away from accessing a portion of your money without penalty. Need $5,000? Wait for the next maturity rather than paying early withdrawal fees.
2. Higher Average Returns
Long-term CDs typically pay higher rates. A ladder lets you capture those higher rates while maintaining flexibility.
3. Interest Rate Hedging
If rates rise, your maturing CDs can be reinvested at the new higher rate. If rates fall, you still have locked-in higher rates on your existing CDs. You win either way.
Building Your First Ladder: Step by Step
Step 1: Decide Your Total Investment
How much can you commit to CDs? This should be money you won't need for at least 5 years (though you'll have annual access after setup).
Step 2: Choose Your Rungs
Common ladder structures:
Step 3: Open Your CDs
Shop for the best rates at each term length. You don't have to use the same bank for every rung.
Step 4: Reinvest at Maturity
When each CD matures, reinvest into a new CD at the longest term in your ladder. For a 5-year ladder, each maturing 1-year CD becomes a new 5-year CD.
Example: $25,000 Five-Year Ladder
Initial Setup (January 2026)
After year 1, your 1-year CD matures. Reinvest $5,225 into a new 5-year CD. Now all your CDs are 5-year terms with annual maturities.
CD Ladder vs. High-Yield Savings
Both are valid strategies. Here's when to use each:
- ✓ Guaranteed rate lock
- ✓ Higher average returns
- ✓ Disciplined savings (can't touch it)
- ✗ Less liquid
- ✗ More complex to manage
- ✓ Instant access anytime
- ✓ Simple to manage
- ✓ Rate can rise if Fed raises
- ✗ Rate can fall if Fed cuts
- ✗ No guaranteed returns
When CD Laddering Makes Sense
- You expect interest rates to fall (lock in current rates)
- You have money you won't need for 5+ years
- You want guaranteed returns
- You appreciate the discipline of locked money
When to Skip Laddering
- You might need quick access (use high-yield savings)
- You expect rates to rise significantly (stay liquid)
- You don't want to track multiple maturity dates
- The rate difference is minimal
The Bottom Line
CD laddering is a smart strategy for money you won't need immediately but want to keep safe and growing. It combines the higher rates of long-term CDs with the flexibility of regular access.
In the current rate environment with potential Fed cuts ahead, locking in today's rates through a ladder could pay off. Just make sure you won't need the money before your first CD matures.