Brian McKay
Brian McKay
Founder & Data Architect- Automated Online Rate Data Aggregation
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How to Build a CD Ladder: Laddering a Certificate of Deposit to Earn More Interest
A CD ladder splits your savings across several CDs with staggered maturity dates, such as 1, 2, 3, 4 and 5 years, so one CD comes due every year. When a CD matures you can withdraw the money or reinvest it in a new CD at the longest term, which keeps part of your savings available each year while the rest earns longer term rates. 12 month CD rates average 2.94% APY and 60 month CD rates average 2.84% APY, verified by MonitorBankRates as of October 13, 2026.
Putting all of your savings into one 5 year CD locks up every dollar until the end of the term. Keeping it all in a 1 year CD gives you access sooner but leaves the whole balance exposed to whatever rates banks offer when it renews. A ladder sits between the two: part of your money comes due every year, and the rest stays locked in at longer term rates.
You can build a ladder at one bank or credit union or spread the rungs across several. This guide covers how a ladder works, what one looks like at today’s average CD rates, and when a different approach may fit your goals better.
MonitorBankRates national averages as of October 13, 2026, computed from rates published by more than 8,000 banks and credit unions.
Key facts
- Typical ladder: 3 to 5 CDs with maturities spaced one year apart
- Access to cash: one CD matures each year once the ladder is built
- At maturity: withdraw or reinvest at the longest rung, usually within a 7 to 10 day grace period
- Insurance: FDIC (banks) or NCUA (credit unions) up to $250,000 per depositor, per institution
How a CD Ladder Works
Each CD in a ladder is called a rung. You divide your savings into equal parts, open one CD per part with a different maturity date, and then keep rolling each maturing CD into the longest term you chose.
Choose the number of rungs
Decide how often you want money to come due. Five rungs spaced one year apart is the most common setup, but three rungs or a ladder with a CD maturing every six months works the same way.
Split your savings evenly
Divide the total by the number of rungs. With $25,000 and five rungs, each CD gets $5,000. Check the minimum opening deposit at each institution before you apply.
Open CDs with staggered terms
Open a 1 year, 2 year, 3 year, 4 year and 5 year CD. Compare rates for each term separately; the bank with the best 1 year rate is often not the one with the best 5 year rate. Our CD rate tables list rates by term from banks and credit unions nationwide.
Reinvest each CD as it matures
When the 1 year CD matures, move it into a new 5 year CD. Do the same each year. After four years every rung is a 5 year CD, and one of them still matures every year.
Set a reminder before each maturity date
Many CDs renew automatically for the same term if you do nothing during the grace period. A calendar reminder a week before each maturity gives you time to compare rates and move the money if another institution pays more.
Example: A 5 Rung Ladder With $25,000
Here is how $25,000 splits across five CDs, with the first year of interest calculated at today’s national average APY for each term.
| Rung | Term | Deposit | Average APY | First year interest |
|---|---|---|---|---|
| CD 1 | 1 year | $5,000 | 2.94% | $146.75 |
| CD 2 | 2 years | $5,000 | 2.83% | $141.55 |
| CD 3 | 3 years | $5,000 | 2.75% | $137.60 |
| CD 4 | 4 years | $5,000 | 2.74% | $137.20 |
| CD 5 | 5 years | $5,000 | 2.84% | $141.90 |
| Total | $25,000 | $705.00 |
Interest is estimated as deposit times APY for one year. Averages are not offers; the best CDs at individual banks and credit unions pay more than the average.
In year one, the 1 year CD matures and goes into a new 5 year CD. In year two, the original 2 year CD matures and does the same. By the start of year five, all five rungs are 5 year CDs and $5,000 plus interest comes due every year. To model your own amounts and rates, use our CD ladder calculator, which starts from today’s MonitorBankRates averages and is updated daily.
How Rates by Term Affect Your Ladder
CD rates at banks and credit unions tend to rise and fall with the federal funds rate set by the Federal Reserve. The Fed raised rates quickly in 2022 and 2023, and CD rates climbed to their highest levels in more than 15 years. The Fed began cutting rates in September 2024, and many banks lowered CD rates after that.
Longer terms often pay more than shorter ones, but not always. When short term CDs pay the same or more than 3 or 5 year CDs, a ladder still spreads out your maturity dates, but the rate reward for locking up money longer is smaller. Compare the averages above, or view the CD rate trends page to see how each term has moved over time.
Rates are not the only factor: Early withdrawal penalties vary widely. One bank may charge 90 days of interest on a 1 year CD while another charges 12 months of interest on a 5 year CD. Read the penalty terms for every rung, since you may need to break one early.
Ways to Customize a CD Ladder
- Short ladder: use 3, 6, 9 and 12 month CDs if you want money coming due every few months or expect rates to rise.
- Standard ladder: use 1 through 5 year CDs for one maturity per year and a mix of rates across terms.
- Uneven rungs: put more money into the terms with the best rates, or keep a larger share in shorter CDs if you expect to need it soon.
- Mixed products: use a high yield savings account as the shortest rung for money you may need at any time.
Pros and Cons of a CD Ladder
Pros
- Part of your savings comes due on a regular schedule without early withdrawal penalties
- You are never forced to reinvest your whole balance at one rate on one day
- Longer rungs keep earning their original rate if banks lower CD rates
- FDIC or NCUA insured when opened at insured institutions
Cons
- Money in longer rungs is locked up unless you pay an early withdrawal penalty
- More accounts and maturity dates to track
- If rates rise quickly, longer rungs keep earning their lower original rates
- Minimum deposits can make small ladders hard to build at some banks
When a CD Ladder Makes Sense
A ladder fits savers who have money they will not need all at once, such as an emergency fund backup, savings for a goal several years out, or retirement income drawn on a schedule. It also fits anyone who does not want to guess which way rates will move, because only one rung renews at a time.
A ladder is less useful for money you may need on short notice. For that, a savings account or money market account gives full access without penalties. Investors who buy CDs through a brokerage can also build ladders with brokered CDs, which work differently if you sell before maturity.
Compare CD Rates
Find the best rates for every rung of your ladder at banks and credit unions nationwide.
All CD Rates CD Ladder CalculatorFrequently Asked Questions
This article is for general information and is not financial advice. Rates shown are market averages, not offers; terms and fees are set by each institution.
