CD Ladder Calculator Build a certificate of deposit (CD) ladder to maximize yield, minimize interest rate risk, and maint...
CD Ladder Calculator
Build a certificate of deposit (CD) ladder to maximize yield, minimize interest rate risk, and maintain liquidity.
Diagram: Each rung matures annually. Reinvest at prevailing rates to maintain the ladder.
Strategy Comparison (5-Year Horizon)
| Strategy | Avg. Yield | Total Interest | Liquidity | Rate Flexibility |
|---|---|---|---|---|
| Calculate to see comparison | ||||
A CD ladder is a strategy where you split your money across multiple certificates of deposit (CDs) with staggered maturity dates — like rungs on a ladder.
Example (5-year ladder, $25,000):
- $5,000 in a 1-year CD @ 3.2%
- $5,000 in a 2-year CD @ 3.5%
- $5,000 in a 3-year CD @ 3.8%
- $5,000 in a 4-year CD @ 4.0%
- $5,000 in a 5-year CD @ 4.3%
Each year, one CD matures. You can then reinvest it into a new 5-year CD — maintaining the ladder and capturing higher long-term rates over time.
CD laddering solves three key problems of single CDs:
- Interest Rate Risk — If rates rise, you can reinvest maturing CDs at higher yields. If rates fall, you still have long-term CDs locked in at higher rates.
- Liquidity Crunch — With a single 5-year CD, your money is locked for 5 years. In a 5-rung ladder, 20% becomes available *every year*.
- Opportunity Cost — A laddered portfolio typically earns **more** than short-term CDs (due to longer-term exposure) and **more consistently** than timing the market with lump sums.
Historical data (2000–2023): A 5-year CD ladder outperformed a 1-year CD 92% of the time and a 5-year lump sum 68% of the time in rising/falling rate environments.
- Skipping rungs — Gaps (e.g., 1-, 3-, 5-year only) reduce liquidity and smoothness.
- Ignoring early withdrawal penalties — Most CDs charge 3–6 months’ interest if cashed early.
- Chasing highest rate only — A 5.0% 7-year CD may underperform a 4.3% 5-year ladder if rates rise in 2 years.
- Forgetting taxes — CD interest is **taxable annually**, even if not withdrawn. Use tax-advantaged accounts (IRA CDs) when possible.
- Auto-renewal traps — Banks often renew at low rates. Mark maturity dates on your calendar!
✅ Pro Tip: Always compare *APY* (Annual Percentage Yield), not just interest rate — it accounts for compounding.
- Enter your total investment amount.
- Choose the number of rungs (3–7 years).
- Select a yield curve:
- Normal: +0.3% APY per year (e.g., 1-yr=3.2%, 5-yr=4.4%)
- Custom: Enter your bank’s actual CD rates
- Click “Build My CD Ladder”.
You’ll get:
- A visual ladder diagram
- Average yield and 5-year interest estimate
- Side-by-side comparison vs. other strategies
Note: Calculations assume annual compounding, no early withdrawals, and reinvestment at maturity.