CD Ladders

  • Dollar Stretcher,
    I had a question about CD's and have not been able to find the answer anywhere. The question is am I better off creating a short them CD ladder or a long-term CD ladder. Meaning Is it better to open 4 CD's with them maturing at 3, 6, 9, & 12 months or with them maturing at 1, 2, 3, & 4 years time. Over a short and long period of time which ladder would earn more interest over let's say a 4, 8, or 12 year period of time?
    Thanks for your help with this question.




    Good question. Over the longer period of time the longer maturity will yield more. Longer term CD's typically earn more than short term. Using the CD comparison tool on our site I found these as an example:

    3 month CD with an APY of 2.0%
    3 year CD with an APY of 2.7%.

    And there's very little risk with the longer term ladder. If you need some money you'd cash in the nearest CD. At worst you'd lose 6 month's interest. So unless you expect to need the money for some future expense, you'll earn more with the 1, 2, 3 & 4 year ladder.

    Keep Stretching those Dollars!


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