CD ladder
Also known as: Certificate of deposit ladder, CD laddering
A CD ladder is a savings strategy that staggers certificate-of-deposit maturity dates so that one CD matures at regular intervals, providing both the higher yield of longer-term CDs and the liquidity of short-term access to a portion of the funds.
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A CD ladder divides a lump sum across multiple certificates of deposit with different maturity dates — typically one maturing every three, six, or twelve months. When a rung of the ladder matures, the saver either withdraws the funds if needed or reinvests into a new CD at the longest rung of the ladder, maintaining the staggered structure. The purpose is to capture the yield premium that longer-term CDs typically offer while retaining periodic access to principal without paying early withdrawal penalties.
A basic five-rung ladder might allocate $25,000 across CDs maturing in one, two, three, four, and five years. After the first year, the one-year CD matures — the saver reinvests it into a new five-year CD (now the longest rung) and holds the other four CDs, which now have one less year to maturity. After five years of this process, the entire ladder consists of five-year CDs maturing one per year, each earning the five-year rate but providing annual liquidity. The reinvestment discipline is what makes the ladder work over time.
CD ladders are most attractive in normal yield curve environments where longer-term CDs pay meaningfully more than shorter-term CDs. In an inverted yield curve (where short-term rates exceed long-term rates, as occurred in 2023-2024), the yield premium disappears and a HYSA or T-bill ladder may produce better returns with better liquidity. The structural advantage of a CD ladder over a single CD is the insurance against rate changes: if rates rise, the nearest-maturing rung can be reinvested at the new higher rate; if rates fall, the longer rungs are locked in at the old higher rate.
FDIC insurance covers CDs at member banks up to $250,000 per depositor per institution. For ladders exceeding $250,000, spreading rungs across multiple banks extends FDIC coverage. Credit union CDs (called share certificates) are covered by NCUA insurance at the same $250,000 per-depositor limit. Interest on CDs is reported on Form 1099-INT and is taxable as ordinary income in the year it accrues, even if the CD has not matured.
- CD ladder mechanics — build, space, and reinvest for yield How to build a CD ladder from scratch: rung spacing, early withdrawal math, inverted-curve strategy, brokered CDs, and the FDIC coverage rules.
- T-bills vs HYSA vs money market funds: the after-tax math (2026) Are T-bills better than a HYSA in 2026? We run the after-tax math — state-tax-free Treasury yield vs the best HYSA rates, FDIC vs SIPC, and liquidity.
- APY (Annual Percentage Yield) The actual annualized return on a deposit account, taking compounding into account. Distinguishes meaningfully from "interest rate" only on accounts with intra-year compounding — which is virtually all US deposit accounts.
- FDIC insurance The Federal Deposit Insurance Corporation insures US bank deposits up to $250,000 per depositor, per insured bank, per ownership category. The structural guarantee that makes savings, checking, money market, and CD accounts at insured banks effectively risk-free up to the limit.
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