CD Laddering Strategies in a Good and Bad Interest Rate Environment

cd laddering strategiesUsing a CD laddering strategy allows you to diversify your investments and minimize risk. It’s like dollar-cost averaging with the stock market. Also, with this approach you’ll benefit from liquidity by always having a portion of your investment near maturity.

However, a one-size-fits-all approach won’t work for changing market conditions. Here’s a plan for laddering your CDs in good and bad interest rate environments.

How it Works 

With a CD laddering approach, you purchase a series of CDS with different maturity dates. For example, you might invest $50,000 in 10 different CDs, with one reaching maturity every 6-month. Once a CD matures, you can invest the funds in a higher yielding CD with a longer term. Or, you can access the money without paying penalties.

Low CD Rates 

With the economic downturn, came lower CD rates. Right now, there’s not always a higher interest rate for longer CD terms. Or, the difference might be small. In this rate environment, keep your CD terms short, unless there’s a meaningful difference between terms.

Also, reduce your risk by moving your longest maturity dates to 24 months or less. This way, when the economy does improve, you can start shifting your funds into longer terms, using a traditional CD Laddering Strategy.

High CD Rates 

When interest rates start rising, you’ll want to take advantage of creating a true laddering strategy. This investment strategy allows you to maximize your investment dollars. For example, let’s say you invest $25,000 dollars in CDs and with access to funds every 12-months. You might purchase:

  • $5,000 12-Month CD
  • $5,000 24-Month CD
  • $5,000 36-Month CD
  • $5,000 48-Month CD
  • $5,000 60-Month CD


For each year a CD matures, you’ll reinvest that money into a 60-month CD. With this strategy, you’re able to access your money each year, offering more liquidity and a stable source of income.

CD Laddering Explained…

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The Right CD Laddering Strategy. There’s no “right” strategy for creating a CD Ladder. Customize your strategy based on your financial needs and the current rate environment. Talk with an investment advisor to develop a strategy right for your situation.