What a CD ladder is
A certificate of deposit (CD) pays a fixed annual percentage yield (APY) if you leave the money alone for a set term, often from three months to five years. The trade-off is liquidity: taking money out early usually triggers an early-withdrawal penalty. A CD ladder reduces that trade-off by splitting one lump sum into several CDs with staggered maturity dates. As each CD matures, you can spend the cash, move it to a high-yield savings account, or roll it into a new long CD at the far end of the ladder.
For example, with $20,000 and four rungs of three, six, nine and twelve months, you put $5,000 in each. After three months the first CD frees up; after six months the second frees up; and so on. Once the ladder is running, you can keep rolling each matured CD into a new twelve-month CD so that cash becomes available every three months while most of the money still earns the longer-term rate.
How this calculator works
Enter the total you want to invest, how many rungs you want, the shortest term and the step between terms. The tool splits the total evenly and compounds each rung at the APY you provide for the fraction of a year that the term represents. If you paste a comma-separated list of APYs, each rung uses its own rate (handy when a bank pays more for longer terms). Interest figures assume annual compounding for illustration; many banks compound daily or monthly, which can add a small amount.
Choosing the rung spacing
- 3-month steps (3/6/9/12) keep cash coming free often and suit people who may need money within a year.
- 6-month steps (6/12/18/24) lean toward higher longer-term rates while still freeing cash twice a year once rolled.
- Equal terms, staggered start is another design: open a new 12-month CD every quarter for a year, then roll each one. This calculator models the classic staggered-term layout; you can approximate a staggered-start ladder by using equal terms and mentally shifting open dates.
Rates, penalties and FDIC
Shop the APY your bank actually quotes today, not a rate from a chart in an article. Compare the annual percentage yield, not the interest rate, so compounding is already baked in. Read the early-withdrawal penalty: common structures are 90 days of interest on short CDs and 180–365 days on longer ones. Keep deposits within FDIC (or NCUA) coverage limits per ownership category; see our FDIC insurance basics guide. A ladder does not remove rate risk for money you roll later — only the CDs you already own are locked.
When a ladder is a poor fit
If you may need the whole sum on short notice, a high-yield savings account is simpler. If you are certain you will not touch the money for years and a long CD pays clearly more, a single long CD can beat a ladder. Ladders shine when you want a middle path: higher locked yields than a pure savings balance, with scheduled liquidity.