CD Ladder: What It Is and How to Build One

Introduction

A CD ladder involves holding multiple Certificates of Deposit (CDs) with different maturity dates.
Example: A 5-year CD ladder might involve:
- Year 1: $X invested
- Year 2: $X invested
- Year 3: $X invested
- Year 4: $X invested
- Year 5: $X invested
Yields vary based on maturity dates and bank rates.
Shorter-term CDs often have higher interest rates than longer-term ones.

Spreads risk and creates liquidity.
Example: Instead of locking $10,000 in one CD for 5 years, you can split it across 5 CDs.
Access money annually instead of waiting for full maturity.

Tools: Barclays CD rates, CD ladder template.
Steps:
1. Determine duration (e.g., 5 years).
2. Check available rates (e.g., 12-month at 5.35%, 60-month at 4.40%).
3. Allocate funds
4. Use a future value calculator to estimate returns.
Example Calculation:
- $25,000 split into 5 CDs of $5,000 each.
- Year 1 CD (5.35%): $5,000 yields $267
- Year 3 CD (4.5%): $5,000 yields $700
- Year 5 CD (4.4%): $5,000 yields $1,230
- Total profit: $3,667 over 5 years.
Template Usage:
- Enter total investment and annual yields
- Template auto-calculates returns and annual amounts received.

CD Ladder: 4-5% returns, limited risk.
Stocks: Higher returns (8-12%), but higher risk.
For large sums: Prefer bonds or notes ladders over CDs due to coverage limits (only $250,000 FDIC insured).

Presenter personally does not favor CD ladders; prefers Roth ladders and other higher yielding investments.
Views CD ladders as suboptimal for earning significant returns.
Suitable for short-term, low-risk parking of funds but not for generating high returns.
Caution against long-term CDs unless interest rates are extraordinarily high.