Why use this calculator
A CD ladder provides a balance of higher interest rates and regular liquidity. By staggering maturity dates, you gain periodic access to funds while capturing rates from longer-term CDs. This calculator compares the ladder strategy to a single CD.
How to use it
Enter your total investment amount, current CD rates for different terms, the number of ladder rungs (CDs), and total investment period. The calculator compares total returns from a laddered approach versus a single CD.
The formula
Single CD Value = Investment x (1 + Rate)^Years. Ladder Value = Sum of (Investment/Rungs) x (1 + Rung Rate)^Years for each rung, using staggered rates across different term lengths.
Worked examples
$25,000, 5 rungs, rates 4.5%/4.2%/4.0%, 5 years
Ladder provides balanced returns with regular access to $5,000 portions
$50,000, 3 rungs, rates 5.0%/4.5%/4.0%, 3 years
Fewer rungs with larger amounts per CD for simplified management
When people use it
- Maximizing CD returns while maintaining periodic liquidity
- Building a conservative fixed-income investment strategy
- Managing cash reserves that you may need at different intervals
- Taking advantage of varying term-length CD rates
Tips
- As each CD matures, reinvest into the longest term in your ladder to capture higher rates
- Consider online banks which often offer higher CD rates than traditional banks
- CD ladders work best when the yield curve is normal (longer terms pay more)
- Factor in early withdrawal penalties when choosing CD terms
Questions people ask
- What is a CD ladder?
- A CD ladder splits your investment across multiple CDs with staggered maturity dates. For example, a 5-rung annual ladder has CDs maturing in 1, 2, 3, 4, and 5 years, providing annual access to funds.
- When is a CD ladder better than a single CD?
- CD ladders are better when you want regular access to funds without early withdrawal penalties, or when longer-term CDs offer significantly higher rates. They also protect against interest rate changes.
- Are CDs FDIC insured?
- Yes, CDs at FDIC-insured banks are protected up to $250,000 per depositor, per bank. This makes them one of the safest investment options available.