CD Ladder Calculator

Cassidy HortonPersonal Finance Reviewer and Writer

Cassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying off $18,000 in debt within 10 months of graduating college. She later went on to triple her salary in two years by ditching her 8-to-5 job to write for a living.

Cassidy Horton

Cassidy HortonPersonal Finance Reviewer and Writer

Personal Finance Reviewer and Writer

Elizabeth AldrichDeputy Editor, Banking

With eight years of experience as a financial journalist and editor and a degree in economics, Elizabeth Aldrich has worked on thousands of articles within the realm of banking, economics, credit cards, investing, loans, personal finance and travel. Her work has been featured in Business Insider, The Motley Fool, Bankrate, Investopedia, LendingTree, Student Loan Hero, ValuePenguin, USA Today, Credit Karma, NASDAQ, Yahoo! Finance and more.

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Elizabeth Aldrich

Elizabeth AldrichDeputy Editor, Banking

Deputy Editor, Banking

Fact Checked

Updated: Oct 23, 2023, 11:32am

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Are you looking to invest in a certificate of deposit (CD) but you’re unsure of the best strategy to maximize your earnings? A CD ladder may be the solution. By investing in a series of certificates of deposit with different maturities, you can benefit from higher interest rates on longer terms while still maintaining short-term liquidity. But how much interest could you earn with a CD ladder?

The CD ladder calculator below makes it easy to determine the best combination of CDs to invest in based on your financial goals and investment timeline.

Simply input the amount of money you want to invest, the length of time you want to invest for and the current interest rates available. The calculator will do the rest.

What Is a CD Ladder?

A CD ladder is a strategy that involves spreading your funds across multiple certificates of deposit with varying maturity dates. When you ladder CDs, you earn a higher return on your investment while keeping some of your money accessible for emergencies and other needs.

You can use a CD ladder calculator to determine the best way to set up your CD ladder.

Example of a CD Ladder

Let’s say you have $10,000 to invest in a CD ladder. Based on your research, you find that two-year CDs have the highest rates, but you know you might need to access your money a couple of times each year. You create a two-year CD ladder with four CDs, each with a different maturity date.

Here’s how you might structure your ladder:

CD 1: Deposit $2,500 into a six-month CD earning 1.00% APY
CD 2: Deposit $2,500 into a one-year maturity earning 1.50% APY
CD 3: Deposit $2,500 into an 18-month CD earning 2.00% APY
CD 4: Deposit $2,500 into a two-year CD earning 2.50% APY

When CD 1 matures after six months, you can reinvest the proceeds into a new two-year CD. Similarly, when CD 2 matures after one year, you can reinvest the proceeds into a new two-year CD. This way, you always have a CD maturing every six months.

By laddering CDs, you earn more in interest than if you were to invest all your money into one six-month CD. However, this approach also gives you more liquidity than if you were to invest all your money into one two-year CD. This is how a CD ladder can help you maximize your earnings without tying up the money you might need.

How Does a CD Ladder Work?

A CD ladder involves purchasing multiple CDs with varying maturity dates. Here’s how it works:

Start by dividing your investment into equal parts.
Invest each part into a CD with a different term length, such as a one-year CD, a two-year CD, a three-year CD and so on.
As each CD matures, reinvest the money into a new CD with the longest term length in your ladder.

Benefits of Investing in a CD Ladder

A CD ladder can help you balance your liquidity needs with the desire to earn higher rates. Here are some of the benefits of using a CD ladder:

You have access to some of your money on a regular basis, which can help you cover unexpected expenses and avoid early withdrawal penalties.
You can earn more interest than you would with a traditional savings account, and the interest rate is guaranteed for the duration of the CD term.
Your CD ladder is FDIC-insured up to $250,000 per depositor, making it a low-risk investment option.
You can take advantage of rising interest rates by reinvesting your money into longer-term CDs as they mature.
You can minimize the impact of falling interest rates by having some of your money in shorter-term CDs that will mature sooner.

How To Build a CD Ladder

Building a CD ladder is a smart way to save for short- and long-term financial goals. Here are the steps to building a successful CD ladder.

1. Determine Your Savings Goals

Before you start building your CD ladder, it’s important to determine your savings goals. This will help you decide how many “rungs” your CD ladder should have and the maturity dates for each one.

Pro Tip

It’s never a good idea to lock all your savings up in a CD—even with a CD ladder. At least some emergency savings should be kept in a high-yield savings account, which you can access at least six times per month without penalty.

2. Shop Around for the Best Rates

Rates on CDs can vary widely across different banks and credit unions. You might find a two-year CD offers 0.01% APY at one bank and 5.00% APY at another institution. Some banks even offer promotional CD rates that are well above the bank’s usual rates. Shopping around for the best CD rates on each term you need can help you maximize your earnings.

3. Use a CD Ladder Calculator

Determining the best combination of CD terms and interest rates to maximize your returns can be complicated. Put your savings goals and time horizon into the above CD ladder calculator, and it will crunch the numbers for you.

4. Open Your CD Accounts

Once you’ve decided on your CD terms and identified accounts you like, you can then open your CD accounts. You can choose to open CDs at one or multiple financial institutions—it’s entirely up to you and will likely depend on which institutions are offering the best rates at the moment.

5. Reinvest Funds as The CDs Mature

As your CDs mature, reinvest them in new CDs with longer terms if you want to keep your CD ladder going. You should also consider rising interest rates and the federal funds rate when reinvesting cash from your CDs. If interest rates are likely to decline, locking in a high rate can be advantageous. However, if interest rates are expected to go up, you might not want to commit your money for too long, as CDs may offer more appealing rates in the near future.

6. Monitor Your CD Ladder and Make Adjustments as Needed

As interest rates fluctuate and your financial situation changes, you might need to make adjustments to your CD ladder. Because CDs alone aren’t typically enough to build long-term wealth, you may eventually consider diversifying your savings by investing in stocks or bonds. If interest rates are low, you may want to consider other creative CD strategies.