CD Ladder Calculator

A ladder splits your money across several terms so a piece comes free every year instead of all of it being locked away. This builds one, and shows what that flexibility actually costs against locking the lot.

Your money

Five is the usual choice.

The rate for each term

Look these up at the bank you would use. They change often.

What you would get leaving it reachable.

The ladder is worth

-

Free to you each year
$0
If you locked it all away
$0
If you left it all in savings
$0
Average rate across the ladder
0%
Interest the ladder earns
$0

Where the money goes

Each block is sized by its share, so you can see whether if you locked it all away or if you left it all in savings is the bigger part without reading a single number.

Try a different number

Move it and watch

-

at {v} for total to put in

What this assumes

And what you can change

Growth is steady every yearReal markets are not
You keep contributing as enteredLife interrupts most plans
Nothing is taken in tax along the wayDepends on the account
Not what you expected?

Why your own figure may differ

Markets do not move in a straight line. A steady rate is a model, not a forecast. Try a lower one too.
Fees eat more than people expect. A percentage point of fees over decades is a large sum.
Inflation shrinks the number. A pot in thirty years buys less than the same pot today.

What each rung is doing

Each rung holds an equal slice locked for a different length of time. The first one comes free after a year, the next after two, and so on.

Each rung of the ladder
RungLocked forAmountRateWorth when it matures

Each rung: amount x (1 + rate) to the power of the number of years. A rate quoted as APY already includes the effect of compounding, so it is not compounded a second time - 4% APY on 10,000 for one year is simply 10,400. When a rung matures it is reinvested into a new longest-term CD, which is what makes it a ladder rather than a one-off.

CD ladders: real examples

Three ways of looking at the same pot of money. Click any card to load it.

  • The standard five-rung ladder

    $50,000 split five ways

    The usual setup, with rates rising as terms get longer.

    The ladder reaches $61,079 over five years - ahead of locking it all up, and $10,000 still comes free every year.

    Load this scenario in the calculator →
  • Short ladder, faster access

    Three rungs instead of five

    Money comes free sooner, at a slightly lower rate.

    You wait less time for the first maturity and more of the pot is reachable each year - the trade is a slightly smaller total.

    Load this scenario in the calculator →
  • When short terms pay more

    An inverted rate curve

    Sometimes one-year CDs beat five-year ones.

    The tool spots it and says so plainly. Locking money up for longer for less return is a bad trade, and it will tell you.

    Load this scenario in the calculator →

Common questions about CD ladders

What is a CD ladder, in plain words?

Instead of locking all your money away for five years, you split it into five equal pieces and lock each one for a different length - one year, two years, three, four, five. After the first year, a piece comes free every single year. You reinvest each piece into a new five-year term as it matures. Within five years everything is earning the best rate, and something still comes free annually.

Why not just lock it all up for the longest term?

Because you would not be able to reach any of it without paying a penalty. A ladder gets you close to the long-term rate while still handing you a slice every year. The tool shows both numbers side by side so you can see exactly what that flexibility costs - it is usually surprisingly little.

What happens if I need the money early?

You pay an early withdrawal penalty, normally a few months of interest. That is the whole point of the ladder - it means you can usually reach the piece that is about to mature instead of breaking one and paying the penalty.

How many rungs should I use?

Five is the common choice because it balances the rate against how often money comes free. Fewer rungs means money comes back sooner but earns less. More rungs means a better average rate but longer to wait for the first one. Change the number in the tool and watch both figures move.

Is a CD better than a savings account?

It usually pays more, but you give up being able to reach the money. For an emergency fund that is the wrong trade - you want that money reachable the day you need it. For money you know you will not touch for a set time, a CD locks in the rate even if rates fall later.

What if rates go up after I lock in?

You would be stuck on the old rate for that piece, which is the real risk. The ladder softens it, because a piece comes free every year and can be reinvested at whatever the going rate is then. That is the quiet advantage of a ladder over one big lump.

The guide behind this calculator

More guides on CD ladders