What Is a CD Ladder?

A Simple Way to Earn More While Keeping Money Accessible

A Certificate of Deposit (CD) ladder is a savings strategy that helps you earn higher interest rates while keeping your money accessible at regular periods. Instead of putting all your savings into one certificate with a single maturity date, you divide your money among multiple CDs with different terms. As each certificate matures, you can either use the money if you need it or reinvest it into a new long-term certificate to continue earning competitive rates.

How Does a CD Ladder Work?

CDs typically earn higher dividend rates than regular savings accounts, making them an ideal investment strategy. Keep in mind that withdrawing funds before maturity may result in an early withdrawal penalty. Using the CD ladder strategy spreads your money across certificates with staggered maturity dates, achieving two important goals:

1. Earning higher long-term certificate rates.
2. Maintaining regular access to your savings by avoiding penalties for early withdrawal.

5-Year CD Ladder Example

If you have $50,000 to invest, you could divide it among five certificates spread out over a five-year period:

• $10,000 in a 12-month certificate
• $10,000 in a 24-month certificate
• $10,000 in a 36-month certificate
• $10,000 in a 48-month certificate
• $10,000 in a 60-month certificate

At the end of 12 months, one certificate matures, providing an opportunity to access your funds or reinvest them.

How to Build a CD Ladder

To get started with a CD Ladder, follow three easy steps:

Step 1: Decide How Much You Want to Invest

Determine the total amount you'd like to invest and divide that amount evenly among five certificates. At Texell, certificate terms range from six months to five years.

Step 2: Open Your Certificates

Purchase certificates with staggered maturity dates: 12, 24, 36, 48, and 60 months.

Step 3: Reinvest Each Maturing Certificate

When your 12-month certificate matures, reinvest the funds into the certificate term that offers the best combination of yield and flexibility. In today’s rate environment, this might not be the longest term. Continue this process each year. Over time, you’ll maintain a certificate ladder with one maturity every 12 months, helping you take advantage of changing rate opportunities while keeping regular access to a portion of your funds. At the end of each year, you can decide to reinvest or use the money as needed. To simply illustrate this, here is an example CD ladder, where your funds are reinvested into a 60-month Certificate after the first term.

What Are the Benefits of a CD Ladder?

Building a CD ladder provides three main benefits:

1. Earn Higher Interest Rates — Certificate rates can vary, and the highest yield is not always the longest term. A certificate ladder allows you to take advantage of competitive rates as market conditions change while maintaining regular access to a portion of your savings. Rather than locking your entire balance into a single certificate, you can reinvest maturing funds into the term that best fits your goals and the current rate environment.
2. Regular Access to Your Savings — Because one certificate matures each year, you'll have regular access to your money. This provides flexibility if your financial needs change, while allowing the rest of your investments to continue growing.

3. Reduce Interest-Rate Risk — A CD ladder reduces the risk of investing all your money into one account when rates are unusually high or low. As certificates mature each year, you can take advantage of other opportunities to reinvest based on current market rates.

Is a CD Ladder Right for You?

A CD ladder may be a good choice if you:

• Prefer predictable, low-risk investments.
• Don't need immediate access to all your money.
• Want to earn higher rates than a traditional savings account may offer.
• Prefer having your money become available on a regular schedule.

Start Your CD Ladder with Texell

If a certificate ladder fits your investment goals, Texell is ready to help. The minimum amount to open a certificate is $1,000, and deposits are insured up to $500,000.¹ You can compare current certificate rates on Texell.org, open your certificates online, or visit any branch for personalized help. If you have questions, we are happy to help at Services@Texell.org, or 855.773.1604.

¹ Your deposits are federally insured for $250,000 and backed by the full faith and credit of the National Credit Union Administration, a U.S. Government agency. Your deposits are insured for an additional $250,000 through private insurance provided by Excess Share Insurance Corp.

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