CD laddering is an effective investing strategy to produce consistent returns relatively higher than a standard savings account without completely sacrificing liquidity. ย The goal of CD laddering is toย match the ‘rungs’ of your CD ‘ladder’ with the maturity dates of your CDs. The rungs represent your needs.ย The CD’s should mature when you need them, be it every three months, every six months, annually, etc.
For this example my target term is five-years (5yr CD), I’d like my CD’s to mature annually and I have $10,000 to invest ($10,000/5yr = $2,000 ea.).ย Now that I’ve established my needs, I’ll buy five $2,000 CDs that will mature one year apart.ย See the example below. Notice how the interest rate increases with the CD term. This allows us to eventually capture the highest interest rates for all of our CDs while still allowing them to mature when we need (annually in this case).
Note: Below rates are just for example and do not represent actual rates.ย Current interest rates may be higher or lower depending on market conditions.
| Year 1 | Value | Term | Rate | Matures in |
| CD1 | $2,000 | 1yr | 1.78% | 1yr |
| CD2 | $2,000 | 2yr | 2.04% | 2yr |
| CD3 | $2,000 | 3yr | 2.32% | 3yr |
| CD4 | $2,000 | 4yr | 2.55% | 4yr |
| CD5 | $2,000 | 5yr | 2.89% | 5yr |
| Year 2 | Value | Term | Rate | Matures in |
| CD2 | $2,000 | 2yr | 2.04% | 1yr |
| CD3 | $2,000 | 3yr | 2.32% | 2yr |
| CD4 | $2,000 | 4yr | 2.55% | 3yr |
| CD5 | $2,000 | 5yr | 2.89% | 4yr |
| CD6 | $2,000 | 5yr | 2.89% | 5yr |
| Year 3 | Value | Term | Rate | Matures in |
| CD3 | $2,000 | 3yr | 2.32% | 1yr |
| CD4 | $2,000 | 4yr | 2.55% | 2yr |
| CD5 | $2,000 | 5yr | 2.89% | 3yr |
| CD6 | $2,000 | 5yr | 2.89% | 4yr |
| CD7 | $2,000 | 5yr | 2.89% | 5yr |
| Year 4 | Value | Term | Rate | Matures in |
| CD4 | $2,000 | 4yr | 2.55% | 1yr |
| CD5 | $2,000 | 5yr | 2.89% | 2yr |
| CD6 | $2,000 | 5yr | 2.89% | 3yr |
| CD7 | $2,000 | 5yr | 2.89% | 4yr |
| CD8 | $2,000 | 5yr | 2.89% | 5yr |
| Year 5 | Value | Term | Rate | Matures in |
| CD5 | $2,000 | 5yr | 2.89% | 1yr |
| CD6 | $2,000 | 5yr | 2.89% | 2yr |
| CD7 | $2,000 | 5yr | 2.89% | 3yr |
| CD8 | $2,000 | 5yr | 2.89% | 4yr |
| CD9 | $2,000 | 5yr | 2.89% | 5yr |
