CD ladder basics
A CD ladder is a strategy in which you open multiple CDs that mature at staggered intervals. This can help you compound your earnings, generate a steady stream of income and gain consistent access to your money.
Step 1 — Distribute your money equally into CDs with increasing terms
For this example, we’re building a 5-year ladder using a $100,000 initial deposit. That means, you would open five CDs with $20,000 each.
Step 2 — Roll over your principal and interest
Each year, when one of your CDs matures, roll over the funds into a new 5-year CD.
Step 3 — Continue building your ladder
Continue this strategy as each of your CDs roll over.
Step 4 — Take advantage of your ladder
Starting in year six, you’ll annually have access to funds from your rolled over 5-year CDs.