CD laddering can help maximize your investment

If you're looking for a guaranteed rate of return along with investment income, CD laddering may be a great savings strategy for you. Building a CD ladder involves splitting your investment among several certificates of deposit with varying maturity dates. Laddering certificates of deposit allows you to take advantage of the higher interest rates typically associated with longer-term CDs, without losing the liquidity and flexibility of a shorter-term CD.

How CD laddering works

Let's say you have $20,000 to invest in certificates of deposit and want access to a portion of the funds at least once a year. Here's one example of how a CD ladder could work:

Start with an initial CD ladder that includes four $5,000 CDs with varying terms: 12-month, 24-month, 36-month and 48-month.
Think of each CD as a rung on a ladder. As one matures, the next one moves up a rung. In this example, when the 12-month CD matures, you would reinvest the funds (minus whatever money you may withdraw) in a new 48-month CD. Likewise, when the 24-month CD matures the following year, you would reinvest those funds in another 48-month CD, and so on.
In this example, at the end of year four, you would own four 48-month CDs in your ladder, with one maturing every year. Over time, as the terms become longer, interest rates increase and the ladder is maximized.
You will benefit from the higher interest rates typical of a longer-term CD, along with penalty-free access to a portion of the funds once every year.

Check out this CD ladder calculator to find out the benefits of investing in a series of CDs with different maturities.

CD laddering is an excellent option for a savings portfolio that can deliver both higher yield interest income and available cash. CDs ensure a guaranteed rate of return, and are FDIC-insured up to $250,000^[1] per depositor.

If you have questions about CD laddering, our personal bankers are here to assist you seven days a week from 7 AM to 9 PM (Central time), excluding holidays. Call us at 1.800.672.3343.

[1]: Temporary increase through 12/31/2013. Limit will return to $100,000 per depositor on 01/01/2014.