CD Calculator · Practical guide
How to Build a CD Ladder
A step-by-step $15,000 example that captures long-term rates without locking up all your cash.
At a glance
The Short Answer
Split your savings into equal rungs across staggered terms — say three $5,000 CDs maturing in 1, 2, and 3 years — and reinvest each maturing rung into a new longest-term CD. You earn long-term rates yet one CD still matures every 12 months.
Interactive tool
CD Calculator
Enter your own values, then compare the result with the examples below.
Results
A $15,000 Ladder, Step by Step
Using FV = P × (1 + APY)^t for each rung:
- 1-year CD at 4.00% APY → matures at $5,200.00 ($200.00 interest)
- 2-year CD at 4.25% APY → matures at $5,434.03 ($434.03 interest)
- 3-year CD at 4.50% APY → matures at $5,705.83 ($705.83 interest)
Total interest across the ladder is $1,339.86, versus $2,117.49 if everything sat in a single 3-year CD — but the ladder hands you $5,000+ of maturing cash every year instead of locking it all up for three.
How the Ladder Maintains Itself
When the 1-year rung matures, roll it into a new 3-year CD. Repeat each year. After the first cycle, every rung earns the higher 3-year rate, yet maturity dates stay staggered one year apart — the ladder's defining benefit.
Tips Before You Build
Match rung spacing to how often you want access: annual rungs suit most savers, while quarterly rungs suit larger balances. Keep the ladder inside FDIC limits ($250,000 per depositor per bank), and use the calculator above to project the maturity value of each rung at the APYs your bank actually offers.
Frequently Asked Questions
How many rungs should a CD ladder have?
Three to five is typical. A 5-rung ladder (1 through 5 years) captures the highest rates but takes longer to fully season; a 3-rung ladder seasons after the first reinvestment.
What happens to a ladder when rates fall?
Existing rungs keep their locked rates until maturity, which cushions the drop. Only the rung you reinvest each year earns the new, lower rate.
Is a CD ladder better than one long-term CD?
It trades a little interest for a lot of liquidity. In the $15,000 example above, the ladder earns about $778 less than a single 3-year CD but frees up a third of your money every year.
Can I build a ladder with no-penalty CDs?
You can, and it adds flexibility, but no-penalty CDs usually pay a slightly lower APY than traditional CDs of the same term, trimming the ladder's total yield.