A “CD ladder” may sound like some complex investing strategy, but it’s actually very simple. It allows you to earn high interest without keeping all of your savings locked up for months or years.
Here’s your no-nonsense guide to building a CD ladder in 2025 — and how it can help you maximize the earnings on your savings for years to come.
What is a CD ladder?
Building a CD ladder involves opening several certificates of deposit (CDs) with different term lengths.
CDs are a type of bank account where you deposit your money for a set term and earn a fixed interest rate (say, a 3.50% APY for six months). You agree not to withdraw your money before the term ends, or else you’ll pay a penalty in the form of lost interest.
But if you divide your money evenly across CDs that mature at different times — say, 1-year, 2-year, and 3-year — you’ll have more frequent access to some of your money while making sure it’s earning high interest. As each CD matures, you can either withdraw the money or reinvest it into a new CD to keep the ladder going.
Why build a CD ladder?
CDs rates are still going strong in 2025. As of today, CDs from top online banks are offering APYs as high as 4.25% — compared to just 0.38% APY on the average savings account, per the Federal Reserve.
So, let’s say you have $10,000. You could build a CD ladder like this:
- $2,000 in a 1-year CD
- $2,000 in a 2-year CD
- $2,000 in a 3-year CD
- $2,000 in a 4-year CD
- $2,000 in a 5-year CD
Each year, one CD matures. You can either withdraw your cash or roll it into a new 5-year CD, which will keep the ladder going and give you a mix of high interest and regular access to your cash.
And with interest rates possibly being cut later this year, now’s the perfect time to lock in higher returns with CDs.
Benefits of CD laddering
Some of the upsides of CD laddering include:
- Steady access to funds: A CD matures every year, so you’re never locked out of your money for too long.
- High, fixed APY: The best CDs have high APYs, and unlike a savings account, your interest rate can’t change.
- Rate protection: If interest rates drop, you’ll keep earning money at the higher rate you locked in previously.
- Low risk: CDs are FDIC insured up to $250,000 per bank, per person.
Things to consider
Here’s what you’ll need to think about before you build your ladder:
- Early withdrawals cost you: Pulling money out before a CD matures usually triggers a penalty. (There are CDs that offer no-penalty early withdrawals, but they tend to have lower APYs.)
- You need to plan ahead: Don’t deposit money you may need in the short term, like your emergency savings. CD laddering works best if you don’t need the cash right away.
- Reinvesting takes discipline: You’ll need to keep reinvesting in CDs if you want to keep the ladder going.
Build your ladder and watch your money climb
Start building your ladder today by comparing rates from online banks. They offer higher APYs than traditional savings accounts and make it incredibly easy to open CDs with different terms.
After that, stagger your savings to maximize earnings — and start enjoying the recurring benefits of CD laddering today.
