CD Ladder Calculator

What is a CD Ladder?

A Certificate of Deposit (CD) ladder is a strategic investment approach that involves dividing your money across multiple CDs with different maturity dates. Rather than putting all your funds into a single CD, laddering allows you to access portions of your money at regular intervals while still earning higher interest rates typically associated with longer-term CDs.

How CD Laddering Works

The basic concept of CD laddering involves purchasing several CDs with staggered maturity dates. For example, if you have $10,000 to invest, instead of putting it all in a 5-year CD, you might divide it into five $2,000 CDs with terms of 1, 2, 3, 4, and 5 years. When the 1-year CD matures, you can reinvest that money into a new 5-year CD, continuing this pattern as each CD matures. This creates a perpetual ladder where you have a CD maturing regularly.

Our standard CD calculator can help you determine the returns on individual CDs within your ladder.

Key Benefits of CD Laddering

• Improved Liquidity: Access to a portion of your funds at regular intervals without early withdrawal penalties.
• Higher Average Returns: Earn higher interest rates from longer-term CDs while maintaining some liquidity.
• Interest Rate Risk Management: Reduce the impact of interest rate fluctuations by regularly reinvesting at current market rates.
• Consistent Income Stream: Create a predictable flow of income as CDs mature at regular intervals.
• FDIC Insurance Coverage: Maintain full FDIC insurance protection by staying within coverage limits across different banks. Learn more with our FDIC limits calculator.

CD Ladder Strategies

1. Traditional CD Ladder

The most common approach involves equal investments across different term lengths (typically 1-5 years). As each CD matures, reinvest into a new long-term CD to maintain the ladder structure.

2. Income-Focused Ladder

If generating regular income is your priority, consider shorter intervals between maturities (e.g., 3-month or 6-month increments). This provides more frequent access to funds but may result in slightly lower overall returns. Our compounding calculator can help you understand how different compounding frequencies affect your returns.

3. Rate Anticipation Ladder

If you expect interest rates to rise, you might keep more funds in shorter-term CDs to take advantage of higher rates sooner. Conversely, if you expect rates to fall, locking in more funds at current longer-term rates might be beneficial. Check current rates with our rate finder tool.

Tax Considerations for CD Ladders

Interest earned from CDs is generally taxable as ordinary income in the year it's paid or available for withdrawal. With a CD ladder, you'll receive interest payments at different times throughout the year, which can help with tax planning. Use our CD tax calculator to estimate the tax implications of your CD ladder strategy.

CD Ladders vs. Other Investment Options

While CD ladders offer safety and predictability, it's important to compare them with other investment options. High-yield savings accounts offer more liquidity but typically lower rates. Our CD vs HYSA comparison tool can help you evaluate these options side by side.

Getting Started with CD Laddering

To create your own CD ladder, start by determining your total investment amount, the number of CDs you want in your ladder, and the term increment between each CD. Our calculator above will help you visualize the structure and potential returns of your ladder strategy.

Remember that the ideal CD ladder structure depends on your financial goals, liquidity needs, and interest rate expectations. Regularly reviewing and adjusting your strategy can help maximize returns while maintaining necessary access to your funds.