CD Ladder

A CD Ladder, otherwise known as a stacked CD, is a savings strategy that spreads your money across multiple certificates of deposit (CDs) with different maturity dates. Instead of locking all your money into a single CD for the same length of time, you divide it among several CDs that mature at regular intervals.

Think of each CD as a rung on a ladder. You might put some money in a one-year CD, some in a two-year CD, some in a three-year CD, and so on. When the shortest-term CD matures, you can use the cash or reinvest it in a longer-term CD and keep the ladder going. Over time, this can give you regular access to portions of your savings while still allowing you to take advantage of the potentially higher interest rates available on longer-term CDs.

Why should you bother with the extra moving pieces? Well, because a CD ladder can offer a middle ground between liquidity and yield. Your entire savings balance isn’t locked away until one distant maturity date, and you’re also less dependent on picking the “perfect” moment to lock in an interest rate. If rates rise, you’ll periodically have CDs maturing that can potentially be reinvested at higher rates. If rates fall, some of your money may still be earning the higher rates you locked in earlier.

The tradeoff is a little more complexity: you’re managing multiple CDs and maturity dates rather than one account. And, as with an individual CD, withdrawing money before a particular CD matures can trigger an early withdrawal penalty.