Laddering Your CDs

What is meant by "laddering" your Certificates of Deposit (CDs)?

"Laddering" is a simple strategy that allows you to take advantage of the higher interest rates offered by Certificates of Deposit (CDs) while providing you with more frequent access to your money than these investments typically permit. Generally, longer-term investments like CDs offer higher interest rates than savings or money market accounts, but limit your access to your money. By following the "laddering" strategy, you can earn high rates and have access to your money.

How do you set up a laddering strategy?

You purchase Certificates of Deposit (CDs) over a period of time, so that they also eventually come due at different points of time-- semi-annually, quarterly or even more frequently. The result is that you can enjoy more frequent access to your money without incurring early withdrawal penalties.

Ladders can be built using any term and increment to provide flexible access to your funds.

What more you should know

• Although you can use this strategy for any size investment amount, it typically is most effective with deposits of $25,000 or more to avoid having a large number of very small CDs.
• Early Withdrawal of Certificates of Deposit (CDs) offers a great way to earn higher interest rates than those offered by savings or money market accounts. But be sure to select your CD term carefully and be aware of penalties for early withdrawal.