Advertiser Disclosure

What Is a CD Ladder?

Nov. 2, 2018
Banking, Banking Basics, CDs, Savings Accounts
NerdWallet adheres to strict standards of editorial integrity to help you make decisions with confidence. Some of the products we feature are from partners. Here’s how we make money.
We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

CD laddering is a strategy used to access higher rates — usually reserved for long-term CDs — while still allowing a portion of your money to be accessible at short-term intervals.

CD ladders in a nutshell

CD laddering is a strategy used to access higher rates — usually reserved for long-term CDs — while still allowing a portion of your money to be accessible at short-term intervals.

CD ladders in a nutshell

CD laddering is a strategy used to access higher rates — usually reserved for long-term CDs — while still allowing a portion of your money to be accessible at short-term intervals.

Certificates of deposit tend to have the highest interest rates among savings accounts — at the cost of losing access to your money for periods of time. But the set-it-and-forget-it approach of a typical CD isn’t the only way to use them.

What is a CD ladder?

A CD ladder is a way of setting up multiple CDs so they mature at staggered intervals. As opposed to repeatedly renewing a single CD that holds all your money, a CD ladder will get you higher interest rates without sacrificing accessibility.

COMPARE THE TOP CD RATES for your cd ladder

CD rates have been rising recently, especially for online banks. Here are examples of the high rates you can lock in.


NerdWallet bank rating:



NerdWallet bank rating:


NerdWallet bank rating:




1-year APY


2.65%



3-year APY


2.75%


5-year APY



3.10%



Minimum deposit



$500






1-year APY


2.65%



3-year APY


2.75%


5-year APY



3.10%



Minimum deposit



No minimum






1-year APY


2.65%



3-year APY


2.85%


5-year APY



3.10%



Minimum deposit



$2,000




Compare more banks and CD rates here

The benefits of CD laddering

The longer a CD’s term — and sometimes the larger your deposit — the higher your rates. (Some rates are over 3% in our list of the top five-year CDs this month.)

But while your money is locked away, interest rates could increase, and you wouldn’t be able to take advantage of them. Or an emergency might leave you in desperate need of that cash, in which case you would incur a penalty for withdrawing money before the maturity date.

CD laddering provides several benefits:

  • Increased accessibility: Your cash will become available to you at frequent intervals.
  • Flexibility: You can decide how you want to split up your investments.
  • Better interest rates: You’ll be able to choose longer-term CDs with higher rates and still have certificates maturing on a regular basis.
  • Peace of mind: If interest rates go up, you’ll have cash to invest in new CDs. If rates fall, you still have money invested in long-term CDs that come with higher rates.

The traditional CD ladder model divides your investment evenly over five CDs, with one CD maturing each year. If you had $10,000 to invest, you could spread out your money like this:

  • $2,000 in a one-year CD
  • $2,000 in a two-year CD
  • $2,000 in a three-year CD
  • $2,000 in a four-year CD
  • $2,000 in a five-year CD

After your one-year CD matures, you can reinvest that money in a new five-year CD. When the second year ends, you can continue this pattern by reinvesting the money from your original two-year CD in another five-year CD. You’ll eventually reach a point where your ladder is made up entirely of long-term CDs, which earn the most interest.

One CD will mature every year, meaning you can either continue investing in five-year certificates or move the proceeds to your checking account.

» If you’re ready to explore options, browse this month’s best CD rates

Alternative CD ladder structures

Dividing your investment equally among certificates isn’t the only option. Some people like to build their ladders based on economic projections. When the direction of interest rates is fairly clear, you may want to approach your CD ladder a little differently.

When interest rates are rising, consider investing a higher percentage of your money in shorter-term CDs.

When interest rates are rising, consider investing a higher percentage of your money in shorter-term CDs. (See our recommendations for one-year CDs with top rates.) When rates are going down, aim to lock a higher percentage of your investment in the longest-term CDs you can afford. Keep in mind that a ladder with equally divided investments offers the widest safety net for your portfolio growth.

» If you’re curious about rising interest rates:  Learn what the Fed rate increases mean for your CDs

Your perfect ladder

One of the best things about laddering is that you don’t have to follow a single model. You can vary the amount you put in each CD depending on how much you expect to need at future intervals or vary the intervals when your CDs mature. Your perfect CD ladder should suit your investment time frame, need for income and liquidity, and comfort level when investing according to projected economic changes.

About the author