A CD ladder is a savings strategy that invests your savings across multiple CDs with staggered maturity dates. When each CD term ends, funds are reinvested in CDs with longer maturities, providing higher interest rates.
CD laddering allows you to invest money in both short-term and long-term CDs so that you can benefit from higher earnings while having greater access to your funds. Benefits include:
- Access to longer-term rates
- Increased funds availability
- Limited interest rate risk
Building a CD ladder is easy. Follow these 3 simple steps:
1. Divide your total investment across multiple CDs with different maturity terms.
2. At Maturity of each CD, roll over your earnings into the longest-term CD within your ladder.
3. After the 1st rollover, CDs will automatically renew for the same term at maturity.
At maturity of each CD, to maintain the CD ladder you should reinvest earnings into the longest-term CD within your ladder.