Optimize your savings by distributing funds across multiple CDs to balance liquidity and yield.
Allocation per Rung:
$1000
Annual Liquidity (Amount Maturing):
$0
Estimated Annual Interest Earned:
$450
A CD ladder is a strategy that involves dividing your total investment capital by the number of maturity periods (or rungs) you wish to have. This structure allows you to take advantage of higher long-term interest rates while maintaining regular access to a portion of your funds.
Formula: Allocation = Total Savings / Number of Rungs
Allocation = Total Savings / Number of Rungs
If you invest $50,000 into a 5-year ladder, each rung receives $10,000. In practice, you would open five separate CDs: one for 1 year, one for 2 years, and so on up to 5 years, each with a $10,000 deposit.
What is a CD ladder?A CD ladder is a savings strategy where you distribute your money across multiple Certificates of Deposit with different maturity dates to balance liquidity and interest earnings.
Why use a CD ladder?It helps you avoid locking all your money into a single long-term rate while still earning more than a standard savings account. As each CD matures, you have regular access to cash.
How often should I reinvest?You should typically reinvest as each rung matures. To keep the ladder going, you reinvest the matured amount into a new CD with a term equal to the total length of your ladder.
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