What is a CD Ladder?
A CD ladder is a savings strategy where you divide a sum of money into equal amounts and invest them in Certificates of Deposit (CDs) with different maturity dates. This approach provides a balance between the higher interest rates of long-term CDs and the liquidity of short-term CDs.
How it Works
Instead of locking all your money in a single 5-year CD, you might split it into five CDs maturing in 1, 2, 3, 4, and 5 years. As each CD matures, you have the option to use the cash or reinvest it into a new 5-year CD, eventually creating a portfolio where a CD matures every year while earning the higher long-term rates.