A CD ladder is a savings strategy that allows you to spread an amount of cash across several certificates of deposit to benefit from higher rates, while also giving you access to a portion of your cash sooner than if all the money was in one CD.
With current rates of 3 to 12 months hovering between 4% and 5%, here is one way to create a CD ladder with your money. Let’s say you have $100k that you want to invest in CDs. The first $25k would be put in a 3-month CD, currently offering around 4.8% interest. The second $25k would be placed in a 6-month CD, offering 4.9%.
The third $25k would be put in a 9-month CD currently offering 5%, and the last $25k would be placed in a one-year CD currently offering 5.1%. The idea is that you are making an average of 5% across all your money, and every three months, you have access to $25k. If you do not need it, you will reinvest that money into a 1-year CD at the going rate. You can repeat this every three months and keep the entire $100k invested until needed.