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What is a CD Ladder & How Can It Take You to New Investment Heights

What is a CD Ladder & How Can It Take You to New Investment Heights

What if we told you there’s a simple way to help make your hard-earned money go even further? It’s true: A CD ladder is a straightforward savings strategy that can reap secure, predictable returns and give you a level of flexibility other investment approaches may not be able to.

If your interest is piqued (We’re sure it is!), keep reading to learn:

  • What a CD ladder is
  • How to build a CD ladder
  • How a CD ladder works

What is a CD Ladder?

CD ladders are a way to save money while earning a reliable and secure return on it over a set of predetermined periods of time.

But First — What are Certificates of Deposit (CDs)?

Certificates of deposit (CDs) are time-based savings vehicles that offer investors a higher rate of return than traditional savings accounts. CDs typically have a set maturity date, and the investor can withdraw their money without penalty after that point. 

CDs can be an excellent way to save for short- to medium-term needs (e.g., unexpected expenses or large purchases) or for longer-term investments (e.g., retirement savings or college funds). They're also a good option for people who want stability in their financial situation and aren't interested in taking on riskier investments like stocks.

To learn even more about certificates of deposit, check out our CD Special page. We cover more of the basics, plus why it makes sense to get your CDs from Valley Credit Union.

So, a CD Ladder Is…

A CD ladder is a collection of CDs, each certificate with a different maturity date. By having a rolling schedule of maturity dates, this technique achieves a staggered-payout investment portfolio.

You can start with as few as two CDs and scale up as needed, depending on your savings goals and risk tolerance. As you can see, you have a fair amount of room to tailor a CD ladder to your means and preferences.

See? Not an especially complex concept at all! And certainly something that’s within reach of most interested investors.

Ladder CD Rates & Dates

The two critical variables for CDs — and therefore a CD ladder — are the rate and/or annual percentage yields (APYs) and the term. The rate/APY tell you how much you’ll earn for committing your money for the corresponding amount of time.

To illustrate, here are the terms and current CD rates with VCU (October 2022). You’ll see how different term lengths offer different returns. And the longer the duration of your CD, the greater the rate of earnings.


(Valley Credit Union also has CD specials, which offer more term options and great APYs!)

CD Ladder Structure

Just like an actual ladder, CD ladders have “rungs” or “tiers.” Each distributed foothold is a separate certificate.

So, in a CD ladder, you wouldn’t buy, for example, three 11-month CDs with an APY of 2.10%. Instead, to max your results (assuming you won’t need to access the money sooner), you might create a CD ladder by purchasing:

  • An 11-month CD (2.25% APY)
  • A 17-month CD (2.50% APY)
  • A 23-month CD (3.00% APY)


what is a cd ladder

How to Build a CD Ladder (Super Easy!)

Unlike some other savings or investment approaches, creating your CD ladder is relatively simple. There isn’t a lot of unfamiliar vocabulary to learn, in-depth research to conduct, or complicated spreadsheets to compile.

The key to success with a CD ladder is to make sure each purchase is made thoughtfully and strategically.

We’ll assume you’ve done the preliminary work of making sure a CD ladder is the way to go for your needs. Decision made, here’s what you do to start your CD ladder:

Step 1: Determine Your CD Ladder Strategy

This involves figuring out:

  • How many CDs you want to include in your ladder
  • How much each CD should be for
  • When you want to purchase each CD
  • When you want to cash out that CD (or if you want to let it roll over)

You’ll also need to do some research at this stage to find the best CD rates/terms for your desired strategy. Additionally, several online CD ladder calculators are available to help you game out different investment scenarios.

So, a CD ladder plan could look something like this:

Term Rate APY # of CDs Amount Disposition
6 Months 0.80% 0.80% 1 $500 Cash Out
11 Months 2.25% 2.25% 1 $1,000 Cash Out
11 Months 2.25% 2.25% 1 $1,000 Roll Over
17 Months 2.50% 2.50% 1 $2,000 Cash Out
17 Months 3.00% 3.00% 1 $1,000 Roll Over


You want the maturity dates to be spread out so that you always have a certificate coming up for renewal or cash out. This gives the ability to access cash if and when needed — like to pay a tuition bill in the fall or to get a new car for your summer cross-country roadtrip.

Basically, you want to map it out so that it’s most advantageous to your wealth pool. If you need help with this, reach out to VCU!

Step 2: Gather Your Funds

Once you know how you want to structure your ladder, you have to figure out where the money to invest will come from.

Typically, one would draw from available reserves that are earning less or are more restrictive than the CDs you’re eyeing. For example, you might take $1,000 from your savings account (earning 0.02% APY) and put it into a 6-month CD and earn 0.80% APY.

As soon as you have the money ready, you’re good to go.

Step 3: Buy Your CDs

CD rates can fluctuate over time. So, we recommend that you reconfirm that the CD rates, terms, and financial institutions you found in Step 1 are still the best on offer. You may have to tweak your plan (or expectations) a little if the CD market has shifted.

When you’re satisfied with your final spate of due diligence, you can buy your CDs. This can be done through credit unions, banks, and other financial services companies. It largely depends on which CDs you want to invest in.

Step 4: Manage Your CDs & Ladder

There are two parts to this phase:

  1. Deciding whether or not to cash out or reinvest each CD as it ages to maturity. You’d likely harvest the money from the CD if you need the cash. Otherwise, you can let your mature CD ride. By not liquidating it, you’ll continue to earn compound interest on your deposit.
  2. Determining the future shape of your ladder. Just because you injected an initial sum to build your CD ladder doesn’t mean you have to stop there. You can continue extending your ladder as long as it suits you and your financial situation.

Both pieces of the management step necessitate that you periodically review your cash requirement, savings needs, and investment goals

And, before you invest further in CDs — in the form of new certificates or by rolling over your existing CDs — you’ll need to reinvestigate the CD market.Changes in rates, terms, and sellers could influence your next moves.

how to build a cd ladder

Benefit of a CD Ladder

Before stepping onto that first rung, you might be wondering what the advantages of a CD ladder are. Or, how CDs stack up to other savings and investment opportunities.

CDs and CD ladders are considered to be safe investments. You can’t lose money on them because they have a guaranteed and locked-in rate of return.Plus, the money you put in them is federally insured up to $250,000.

As far as investments go, CD ladders are really simple and straightforward. They aren’t swaddled in confusing jargon, PhD-level calculations, or interdependent investment matrices. They are plain, unsexy, and understandable to most.

Another great thing about CD ladders is how accessible they are. They’re easy to set up because CDs are readily available. And, you have lots of options so you can construct a CD ladder that meets your specific criteria.

CD Ladders vs Competing Options

You have loads of choice when it comes to socking your money away. You have a good grasp on CD ladder’s strengths — but it’s good to see how they fare when pitted against other saving and investing strategies and products.

Compared to other options, CD ladders tend to have:

  • Higher yields. Many CD ladder investments offer more favorable rates of return than some stocks or mutual funds.
  • Lower risk. With a CD ladder, you are taking on a lower risk since you’re not investing all of your money in one place or in something that has variable (or potentially no) return.
  • More flexibility. You can easily add or subtract investments from your CD ladder at any time, clinching peak rates. (Penalties may apply to early withdrawal.)
  • Lower maintenance. Unlike stock or mutual fund investments, a CD ladder doesn’t require you to make regular contributions or take any action to maintain your investment.

how does a cd ladder work

Climb the CD Ladder with Valley Credit Union

Ascending the step-stool to greater wealth is every person’s right — but it can be confusing or hard to get started. That’s why VCU is eager to help. It’s our honor and pleasure to assist members in reaching their financial objectives with outstanding service and support, exceptional products, and helpful resources.

Contact us today to learn more about becoming a member and assembling your CD ladder.

About the Author

 Katie ClarkDirector of Administrative Services

Katie Clark has been at Valley Credit Union since 2011. She serves as the Board Secretary and oversees Human Resources, Marketing and Facilities for the credit union, some even call her the credit union mom. As a CUNA and GoWest HR council member she stays connected with the latest industry happenings. When she’s not in the office she enjoys weekends with family & drinking wine at the Oregon coast.

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