What is a CD Ladder?

A Certificate of Deposit (CD) ladder is a savings strategy where you divide your investment across multiple CDs with different maturity dates. This approach allows you to take advantage of higher interest rates on longer-term CDs while maintaining regular access to a portion of your funds. As each CD matures, you can either withdraw the money or reinvest it into a new CD, potentially at a higher rate. This strategy helps balance the desire for higher returns with the need for liquidity.

How to Use the CD Ladder Calculator

Step 1: Enter Your Initial Investment

Begin by inputting the total amount you wish to invest in your CD ladder. This is the sum that will be distributed across all the CDs in your ladder. Enter this amount in the “Initial Investment ($)” field.

Step 2: Specify the Number of Rungs

Decide how many CDs you want in your ladder. Each CD represents a “rung” in your ladder. Enter this number in the “Number of Rungs” field. A typical CD ladder might have 3 to 5 rungs, but you can adjust this based on your financial goals.

Step 3: Input the Average Interest Rate

Enter the average annual percentage yield (APY) you expect to earn across all CDs in your ladder. This can be an estimate based on current CD rates. Input this rate in the “Average Interest Rate (%)” field.

Step 4: Calculate Your CD Ladder

Click the “Calculate CD Ladder” button. The calculator will process your inputs and display the results.

Step 5: Review the Results

Examine the table showing each rung of your CD ladder. You’ll see the initial investment for each CD, its projected value at maturity, and the maturity period in years. The calculator also provides the total value of your ladder at maturity and your overall gain.

Step 6: Analyze and Adjust

Based on the results, you can adjust your inputs to see how different scenarios affect your potential returns. Try varying the initial investment, number of rungs, or interest rate to optimize your CD ladder strategy.

By following these steps, you can effectively use the CD Ladder Calculator to plan and visualize your CD investment strategy, helping you make informed decisions about your savings and investments.