CD Laddering: How To Build One Using National Rates
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CD Laddering: How to Ladder CDs Using National Rates

  • A CD laddering strategy involves opening multiple certificates of deposit with staggered maturity dates.
  • A CD ladder may be a great fit if you’re looking for a low-risk way to earn interest on your savings.
  • You may have to pay an early withdrawal penalty if you take funds out of a CD before it matures.
  • The best CD rates are often provided by online banks so it’s important to shop around before building a CD ladder.
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  • Early-withdrawal penalty
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What is a CD ladder?

A CD ladder is a savings method that allows you to spread a sum of money across several certificates of deposit accounts with different maturity dates. Creating one allows you to take advantage of the best CD rates while they’re available.

CDs pay a fixed interest rate on money held for a certain amount of time, making it possible to grow your savings balance. Each CD produces predictable returns, making CD ladders ideal for consumers who don’t want to dabble in high-risk investments.

Due to the low level of risk involved in creating a CD ladder, this strategy is also ideal for older adults who want to move away from high-risk investments as they get closer to retirement.

Many banks charge an early withdrawal fee if you take money out of your account before the CD matures. If you decide to create a CD ladder, be sure to keep track of upcoming maturity dates. Otherwise, you may incur a penalty.

How does CD laddering work?

The CD laddering strategy involves opening CDs with staggered maturity dates. If you spread your money across several CDs, you’ll never have to wait very long to access some of your funds. For example, if you purchase a three-month CD, you only have to wait three months to make a penalty-free withdrawal.

Assume you have $24,000 to add to a CD ladder. The table below shows how you could distribute the funds to take advantage of high interest rates.

Term APY Amount Deposited
3 months 5.25% $3,000
6 months 5.1% $3,000
9 months 5% $3,000
12 months 5% $3,000
18 months 4.6% $3,000
24 months 4.2% $3,000
36 months 4.15% $3,000
60 months 4% $3,000

As you can see, the first CD matures in three months, so you don’t have to wait long to access your money. You can withdraw cash or use the funds to add another CD to your ladder.

How to build a CD ladder

Follow these steps to develop a CD laddering strategy that matches your needs:

1

Decide your savings goals.

Before you create a CD ladder, think about what you want to accomplish. Are you trying to take advantage of high APYs for one or two years, or do you intend to keep adding CDs to your ladder for the foreseeable future? Setting a savings goal makes it easier to determine how many CDs to open and how much to deposit.

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2

Determine your investment amount.

You don’t need millions of dollars to create a CD ladder, but this strategy works best if you have a few thousand dollars saved. Otherwise, you won’t be able to open many CDs. Think carefully about how much to deposit in each account. Be sure to leave some money in a standard or high-yield savings account for financial emergencies before your first CD matures.

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3

Research national CD rates for different terms.

Banks often offer multiple CD terms, with shorter terms earning higher interest rates than longer ones. This is because banks base their interest rates on the Federal Funds rate, which changes up to eight times a year. Banks manage their risk by assigning lower APYs to CDs with longer terms.

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4

Allocate funds across different terms.

A ladder has several rungs, so a CD ladder needs more than one CD. If your bank offers eight or nine term lengths, you don’t have to use them all, but you should allocate your funds across at least three or four CDs to maximize the benefits of the CD laddering strategy.

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5

Reinvest funds at maturity.

When a CD matures, you can withdraw the funds and use them for anything you want, but that defeats the purpose of having a CD ladder. Instead of spending your funds, reinvest them.

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Our top picks for CD rates

How much can you earn using a CD ladder?

The table below shows national average CD rates for terms ranging from one to five years.

Term Amount invested National average CD rate Maturity date (assumes an opening date of October 1, 2024) Potential earnings (assumes monthly compounding)
1-year CD $10,000 1.88% September 30, 2025 $190
2-year CD $10,000 1.55% September 30, 2026 $315
3-year CD $10,000 1.43% September 30, 2027 $438
4-year CD $10,000 1.35% September 30, 2028 $555
5-year CD $10,000 1.42% September 30, 2029 $735

*Data on national CD rates comes from the FDIC, which last updated these figures on September 16, 2024. The calculations provided are just a simple representation and may differ depending on the calculator used. Always seek advice from a qualified professional before making important financial decisions or long-term agreements.

CD ladder pros and cons

Before you try the CD laddering strategy, familiarize yourself with these pros and cons.

Pros
  • Low-risk savings option
  • Steady earnings over time
  • Quick access to cash with shorter CD terms
  • Ability to take advantage of high short-term APYs
Cons
  • Interest rate changes may affect your earnings
  • Not the best way to maximize earnings
  • Early withdrawal penalties if you access your funds before a CD matures

CD ladder pros explained

CD ladder cons explained

Current national average CD rates

The table below shows the national average CD rates:

CD term Current national average CD rates National average CD rates 2023
1-month CD 0.24% 0.26%
3-month CD 1.55% 0.62%
6-month CD 1.81% 1.19%
12-month CD 1.88% 1.59%
24-month CD 1.55% 1.45%
36-month CD 1.43% 1.36%
48-month CD 1.35% 1.3%
60-month CD 1.42% 1.37%

*Data on national CD rates comes from the FDIC, which last updated these figures on September 16, 2024.

Current CD rates offered by banks

Many banks offer CDs with a 5% APY. These high-yield savings options are mostly available through online banks as they have lower operating costs than traditional brick-and-mortar banks. While 6% CDs are also available, they are hard to come by and are typically offered by credit unions, which may have membership requirements.

Let’s take a look at the current CD rates from some major banks.

Current 6-month CD rates

Bank APY Minimum deposit
Bank of America 0.03% $1,000
Citibank 3.50% $500
Marcus 4.30% $500
U.S. Bank 0.05% $500
Wells Fargo 2.00% $2,500

*Figures are correct as of October 2024 and are based on an LA zip code.

Current 1-year CD rates

Bank APY Minimum deposit
Bank of America 0.03% $1,000
Citibank 2.50% $500
Marcus 4.20% $500
U.S. Bank 0.05% $500
Wells Fargo 1.01% $2,500

*Figures are correct as of October 2024 and are based on an LA zip code.

Current 3-year CD rates

Bank APY Minimum deposit
Bank of America 0.03% $1,000
Citibank 2.00% $500
Marcus 3.90% $500
U.S. Bank 0.10% $500
Wells Fargo N/A N/A

*Figures are correct as of October 2024 and are based on an LA zip code.

Current 5-year CD rates

Bank APY Minimum deposit
Bank of America 0.03% $1,000
Citibank 2.00% $500
Marcus 3.80% $500
U.S. Bank 0.25% $500
Wells Fargo N/A N/A

*Figures are correct as of October 2024 and are based on an LA zip code.

Alternative CD ladder structures

If you want a little variety in your banking life, check out these alternative CD ladder structures. One of them may help you reach your goals a little faster than a standard CD ladder would.

Barbell CD ladder

A barbell CD ladder allows you to put half of your money in short-term CDs and the other half in long-term CDs. For example, if you have $10,000 saved, you might use $5,000 to open a three-month CD, a six-month CD and a one-year CD. Then, you’d use the other $5,000 to open CDs with terms of two-years, three-years, four-years and five-years. Barbell CD ladders generally increase your average yield.

Bullet CD ladder

If you don’t need access to your cash for several years, consider creating a bullet CD ladder, which includes several CDs with the same maturity dates. For example, you could create a bullet CD ladder with terms of three, four and five years. The purpose of doing a bullet CD ladder is to receive a large amount of money at one once. A barbell CD is ideal if you’re saving up for a large expense, such as a down payment on a house.

Bump-up CD ladder

A bump-up CD ladder is exactly what it sounds like—a ladder of bump-up CDs, which are CDs that give you the option of increasing your APY before they mature. Increasing your APY helps boost your overall yield, so you may earn more than you would with a standard CD ladder.

Our top picks for CD rates

FAQ: How to ladder CDs using national rates

Is CD laddering a good idea?

CD laddering is a good idea if you’re looking for a low-risk savings method that produces predictable returns. Although this strategy has several benefits, avoid putting all your eggs in one basket. You should reserve some of your funds in a savings account for emergencies, investing and other uses.

What is a simple way to ladder your CDs?

The simplest way to ladder your CDs is to create a standard CD ladder. With the bullet ladder, you have to plan carefully to ensure your CDs mature at the same time. Bump-up CDs have benefits, but you have to pay attention to interest rate changes to take advantage of higher APYs.

How much money do you need to start a CD ladder?

If you want to add four CDs to your ladder, you’ll need at least $2,000 to $10,000 as many financial institutions have minimum deposit requirements for CDs ranging from $500 to $2,500.

Is laddering an effective technique for investing in CDs?

Yes, laddering is an effective technique. When you buy CDs with multiple terms, you don’t have to worry about waiting several years to access your funds. If you don’t want to do a standard CD ladder, you can use one of three alternatives to maximize your earnings or save up for a large expense.

CD laddering is also a flexible approach to savings, as you can open accounts at several banks to take advantage of the most favorable terms.

What happens when a CD matures in a ladder?

When a CD matures, you can either withdraw the money or reinvest it. CD ladders maximize your earnings, so it’s best to reinvest the funds. Otherwise, you may end up spending the money instead of saving or investing it.

Can I withdraw funds from a CD before it matures in a ladder?

Yes, you can withdraw funds from a CD before it matures. However, most financial institutions charge an early withdrawal penalty if you take money out before your CD maturity date. If this is a concern for you, look for no-penalty CDs.

A no-penalty CD, also known as a liquid CD, allows you to withdraw funds without incurring an early withdrawal penalty. This type of savings option typically has lower rates than a standard CD, but it may be a better fit if you think you’ll need quick access to your money.

About the Author

Leigh Morgan
Leigh Morgan Personal Finance

Leigh Morgan is a seasoned personal finance contributor with over 15 years of experience writing on a diverse range of professional legal and financial topics. She specializes in subjects like navigating the complexities of insurance, savings, zero-based budgeting and emergency fund development.

In the last five years, she’s authored over 300 articles for credit unions, digital banks, and financial professionals. Morgan is also the author of “77 Tips for Preventing Elder Financial Abuse,” a book focused on helping caregivers protect the elderly from financial scams.

In addition to her writing skills, she brings real-world financial acumen thanks to her previous experience managing rental properties as part of a $34 million real estate portfolio.

About the Reviewer

Blake Esken
Blake Esken Los Angeles Times

Blake Esken has over 15 years of experience in product management and has been a member of the Los Angeles Times staff for over five years.

As part of his role at the Los Angeles Times Commerce Team, Blake acts as the in-house reviewer and fact checker for LA Times Compare. He supervises all content for compliance and accuracy and puts to use skills he has honed through years of experience managing high-stakes projects for a range of industry-leading companies.

He has a strong background in data analysis, compliance, and communication, which allows him to support LA Times Compare through fact-checking in an effort to provide up-to-date and factual information across our content.

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