Certificate of Deposit Ladder

Guide To CD Laddering

Since it’s generally true that long-term certificates of deposit (CDs) earn the highest interest rates, CDs can be a powerful way to save money, but life’s unpredictability can sometimes leave you wondering if you can afford to be without ready access to your CD balance until it matures. That’s where CD laddering can help. With a CD laddering strategy, you can maximize your earnings while still getting periodic access to your money.

In its most basic form, a CD laddering strategy might look like this: Instead of opening a 5-year $5,000 CD, you would divide your initial deposit into 5 equal CDs:
$1,000 in a 5-year CD
$1,000 in a 4-year CD
$1,000 in a 3-year CD
$1,000 in a 2-year CD
$1,000 in a 1-year CD

When your 1-year CD matures, you would have access to $1,000 plus the interest you earned. Because you’re building a CD ladder, you’d roll at least part of that money into a new 5-year CD, knowing that in one year, your 2-year CD will be available to do the same. The CD laddering pattern would then continue as each initial CD matures.

CD laddering can be used to build savings for a long-term goal like saving up for a house, education expenses or anything else. Depending on how much money you deposit, you can even use CD laddering to build a steady stream of interest income, withdrawing only the interest earned on each CD as it matures. Check out the CD ladder calculator at AllyBank.com and explore your options.

One factor to keep in mind when using a CD ladder strategy is FDIC insurance limits on your deposits. With an FDIC-member bank like Ally Bank, it makes sense to look for ways to maximize FDIC coverage up to the maximum allowed by law.

Ready to build a ladder toward your financial goals? Ally Bank offers CDs in a wide range of terms so you can build a CD ladder that best suits your needs. There’s no minimum deposit to open and all of our CDs are backed by the Ally Bank Ten Day Best Rate Guarantee. Whether you're interested in our High Yield CD, No Penalty CD or Raise Your Rate CD, we're confident you'll find an option to help you meet your savings goals. Learn more at Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.