CD Ladder Calculator: How to Build a CD Ladder That Pays More

A CD ladder is a strategy where you divide your savings across CDs with staggered maturities. As each CD matures, you reinvest it in a new long-term CD.

The result: you capture higher rates from longer maturities while maintaining predictable access to cash.

The Problem with Single CD Investing

If you put $50,000 in a 1-year CD at 4.75%, you earn $2,375 annually and get access to all $50,000 when it matures.

If you put $50,000 in a 5-year CD at 5.25%, you earn $2,625 annually — but your money is locked up for 5 years. Breaking it early costs a penalty (usually 6-12 months of interest).

A CD ladder gives you the higher rate while maintaining regular access to your money.

A Basic 5-Year CD Ladder

Divide $50,000 into five equal $10,000 portions, each in a different CD:

| CD | Amount | Term | Rate (Example) | Annual Interest | |----|--------|------|----------------|----------------| | CD 1 | $10,000 | 1 year | 4.75% | $475 | | CD 2 | $10,000 | 2 year | 4.90% | $490 | | CD 3 | $10,000 | 3 year | 5.00% | $500 | | CD 4 | $10,000 | 4 year | 5.15% | $515 | | CD 5 | $10,000 | 5 year | 5.25% | $525 | | Total | $50,000 | | Avg: 5.01% | $2,505/yr |

Each year, one CD matures. If you need the cash, take it. If not, roll it into a new 5-year CD at current rates.

How the Ladder Grows Over Time

After year 1: CD 1 matures. Roll into a 5-year CD. After year 2: CD 2 matures. Roll into a 5-year CD. After year 5: All CDs are now in 5-year maturities, with one coming due each year.

Once the ladder is fully built, you have a 5-year CD maturing every 12 months, all earning the 5-year rate.

Year 5 interest on a fully built $50,000 5-year ladder at 5.25%: $2,625/year

CD Rates in 2026

Current CD rates vary by bank and term. Online banks and credit unions typically offer significantly better rates than traditional brick-and-mortar banks.

| Term | Typical Online Bank Range | |------|--------------------------| | 6 months | 4.50-4.85% | | 1 year | 4.60-5.00% | | 2 years | 4.40-4.80% | | 3 years | 4.30-4.70% | | 5 years | 4.50-5.00% |

Compare current CD rates at Best CD Rates before building your ladder.

Early Withdrawal Penalties

Most CDs charge an early withdrawal penalty if you break before maturity:

| CD Term | Typical Penalty | |---------|----------------| | Under 1 year | 3 months interest | | 1-3 years | 6 months interest | | 3-5 years | 12 months interest |

A 5-year CD at 5% broken after year 1 would cost 12 months of interest, effectively giving you year-1 earnings of 0%. Plan your liquidity carefully.

No-Penalty CDs

Some banks offer no-penalty CDs, where you can withdraw early without cost. The trade-off is a slightly lower rate (often 0.25-0.50% less than comparable penalty CDs). For money you might need, no-penalty CDs provide flexibility worth the small rate haircut.

CD Ladder vs High-Yield Savings Account

| | CD Ladder | HYSA | |--|----------|------| | Rate | Fixed, locked in | Variable, can change | | Access | Regular (one tranche/year) | Anytime | | FDIC coverage | Yes | Yes | | Rate certainty | High | Low |

If rates fall, the CD ladder locks in today's higher rates. If rates rise, the ladder reinvests each maturing CD at the new higher rate. The HYSA adjusts immediately to whatever the current rate is.

See Best Savings Accounts for current high-yield savings account rates as a comparison point.

Use the CalcMoney Savings Goal Calculator to model your CD interest accumulation over the ladder's lifetime.

Frequently Asked Questions

How many rungs should my CD ladder have?

3-5 rungs is standard for most ladders. A 5-year ladder provides good rate capture and annual liquidity. A 10-year ladder is possible but ties up money for very long periods in most scenarios.

Should I build a CD ladder or buy Treasury bonds instead?

Treasury bills and notes are state-tax-free while CD interest is taxed at all levels. At high state income tax rates, T-bills can offer a higher after-tax yield than equivalent CDs. Run the comparison using your state tax rate.

Can I build a CD ladder within an IRA?

Yes. Most IRA custodians allow CDs within the account. This eliminates annual federal and state taxes on the interest, making the effective after-tax return even higher. Check with your specific custodian for available CD options and minimums.