CD ladder

What It Means

A CDCertificate of depositA deposit you agree to leave at a bank or credit union for a set term, until its maturity date, usually with a penalty for taking money out early. See more ladder is a way of holding certificates of deposit so they don't all mature on the same day. You split the money you're willing to lock up into equal parts and put each part in a CD with a different term, such as 1, 2, 3, 4 and 5 years. When the shortest one matures, you can spend that money or roll it into a new long-term CD, so one CD keeps coming due at a regular interval.

How People Say It

• "I've got a CD coming due every year."
• "The one-year rung matures in March, then I'll roll it into a five."
• "Laddering means I'm never locked up all at once."

The Breakdown

Formula

Money in each CD = total ÷ number of rungs. Longest term = number of rungs × months between rungs.

Worked example. In October 2026, Rosa has $1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more,000 she won't need all at once and builds a five-rung ladder.

In October 2027, the 1-year CD matures. Rosa can take the $2,000 plus interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more or roll it into a new 5-year CD maturing in October 2032. Doing that each year leaves her with five 5-year CDs, one of which comes due every October.

What the result means. The ladder trades some of the lock-up of a single long CD for regular access: Rosa never waits more than a year for part of her money without paying an early withdrawal penaltyEarly withdrawal penaltyThe IRS 10% additional tax on money taken from a 401(k), IRA or similar account before age 59½, unless an exception applies. See more. The CFPB notes a renewed CD's rate can be higher or lower than the old one, so each rung earns whatever rates are on offer the year it renews.

What moves the result. More rungs mean smaller pieces coming due more often. A shorter gap between rungs, such as six months, gives quicker access, and a longer ladder reaches further out.

Good to Know

The CFPB says your bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more may roll a CD over automatically at the end of its term unless you tell it otherwise, and the new rate may be higher or lower. Mark every maturity date so you can compare rates before a rung renews. Taking money out of a rung early usually costs an early withdrawal penalty. CDs bought through a brokerage work differently: Investor.gov notes brokered CDs are sold on a secondary market, where you may get back less than you paid. Deposit insurance applies per depositor, per insured bank, for each ownership category, so a large ladder can be spread across banks.

Related Terms and Categories

• Certificate of deposit

  A deposit you agree to leave at a bank or credit union for a set term, until its maturity date, usually with a penalty for taking money out early.

• APY

  A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

• High-yield savings account

  A savings account paying a variable interest rate that's generally higher than a traditional savings account's, often offered by online banks.

• Money market account

  A bank or credit union deposit similar to savings that may pay a higher, tiered rate for bigger balances and often allows checks or a debit card.

• Emergency fund

  Money set aside only for unplanned costs, like a car repair, a medical bill or a lost paycheck, kept where you can reach it quickly.

Saving and investing basics