How to Build a CD Ladder

Build a CD ladder to earn higher interest rates while keeping money accessible by staggering certificate maturity dates.

1. Decide your ladder structure and timeline. Choose how many CDs you want and their maturity lengths. A common 5-rung ladder uses 6-month, 1-year, 18-month, 2-year, and 3-year CDs. Pick a structure that matches when you might need the money — shorter ladders give more flexibility, longer ones typically pay higher rates.
2. Calculate how much money goes in each CD. Divide your total savings amount by the number of CDs in your ladder. If you have $10,000 for a 5-rung ladder, put $2,000 in each CD. Keep the amounts equal so you get predictable access to the same sum at regular intervals.
3. Shop for CD rates at different institutions. Compare rates at banks, credit unions, and online institutions for each maturity length you need. Credit unions often offer higher rates than big banks. Make sure each institution has FDIC or NCUA insurance up to $250,000 per depositor.
4. Open your CDs all at once. Purchase all the CDs in your ladder simultaneously to get current market rates. This creates staggered maturity dates from the start. Read the terms carefully — some CDs have early withdrawal penalties of 3-12 months of interest.
5. Reinvest or cash out as each CD matures. When the first CD matures, you can either cash it out or roll it into a new CD at the longest term in your ladder. If you reinvest, you maintain the ladder structure while potentially capturing higher rates if they've risen.