Certificates of Deposit (CDs) are a popular investment solution among those who prioritize predictable returns and capital preservation over higher, but riskier, potential gains. However, tying up your money into one long-term CD isn’t always the best way to go about it, especially if you’re not keen on losing access to all your funds.
Illiquidity is a major drawback of CDs, but fortunately, there are ways around it. CD laddering is one such strategy.
With CD laddering, you reap the benefits of investing in CDs, like predictable returns and insured deposits , without locking up your entire balance for years at a time. Plus, it’s easier to set up than many people think.
In this blog, we’ll explain CD laddering, how it works, and how Colonial can help you with this strategy.
CD laddering is a savings strategy that involves opening several certificates of deposit (CDs) with staggered maturity dates. Instead of putting all your money into a single CD, you divide it across multiple terms, typically ranging from one to five years. Each CD matures at a different time, giving you access to a portion of your funds at regular intervals.
Here’s a simple example of a five-year CD ladder:
As each CD matures annually, you can choose to reinvest it into a new five-year CD, extending the ladder and keeping the cycle going. Alternatively, you can use the funds if you need to.
This approach gives you regular liquidity while positioning portions of your savings in longer-term CDs, which often offer higher rates than shorter ones. CD laddering is especially useful for those who want to maintain access to their funds over time without having to time the market or make frequent changes to their accounts.
Rather than committing your full savings to a single long-term CD, laddering gives you partial access each year as CDs mature. This structure works well if you anticipate future needs, like tuition payments, travel or home expenses, and prefer not to face early withdrawal penalties.
With one CD maturing annually (or even more often with shorter ladders), you maintain regular opportunities to reassess your needs and decide whether to reinvest or use the funds.
Apart from liquidity, other benefits of CD laddering include:
CD laddering helps you stay more adaptable to rising and falling interest rates. If rates go up, you can reinvest maturing CDs at updated terms. If rates drop, the longer-term CDs already in place can help maintain some rate consistency.
This doesn’t eliminate risk entirely, but it does provide a way to spread that risk over time. You’re not tied to a single rate or forced to reinvest everything at once, which can be helpful when market conditions are unpredictable.
CDs are savings products that offer a guaranteed return as long as the funds remain on deposit through their full term. This can appeal to those looking to preserve savings while still earning interest. In addition, CDs at FDIC insured institutions like Colonial are protected up to the applicable limits.
Meanwhile, laddering CDs allows you to enjoy this predictability across multiple terms. By spreading deposits over several maturity dates, you create a structured plan that supports consistent growth while offering periodic access to your funds.
After the initial setup, a CD ladder doesn’t require constant attention. Once you’ve built the ladder, you can use online banking tools to monitor maturity dates, check rates and decide when and how to reinvest.
A thoughtfully structured CD ladder reflects your personal timeline, financial goals and cash flow needs. Whether you’re saving for a future expense or looking for steady, low-maintenance growth, a ladder can help you get there.
Here’s how to get started.
Start by identifying the total amount you’re ready to set aside in CDs. Then divide that amount across the number of terms in your ladder. Many people choose to split funds evenly, but you can also adjust based on when you might need access to certain portions.
For example, if you’re building a four-year ladder with $20,000, you might allocate:
Typical ladder lengths range from three to five years, but you can create a custom schedule based on your goals. Shorter ladders give you quicker access to funds and allow faster adjustment to rate changes. Longer ladders may allow you to take advantage of higher-term rates.
There’s no one-size-fits-all approach to ladder length: it depends on your savings priorities and when you expect to need the money.
Once you’ve selected your terms and amounts, open your CDs simultaneously, each with a different maturity date. This creates the ladder’s structure and starts the cycle of regular maturity events.
Each year (or other interval), one CD will mature. You can then decide whether to use the funds or reinvest them into a new CD that matches the longest term in your ladder. Over time, all CDs can rotate into the longer-term slots, allowing you to maintain a cycle of maturing CDs while still earning competitive rates on part of your savings.
It’s important to stay on top of when your CDs mature. Most institutions, including Colonial, provide maturity notices and online tools that make this easy. When a CD comes due, you can roll it into a new one, transfer it to another account or withdraw it, depending on your plans.
Tracking maturity dates helps you avoid automatic renewals on terms you no longer want and ensures you’re using your funds in the way that best fits your goals.
You don’t have to use CD laddering as your only savings method. Some savers combine ladders with a high-yield savings account or money market account for more flexible access to funds. This way, your ladder supports longer-term growth while your savings account covers short-term needs.
Colonial offers savings and money market options that complement your CD strategy and help you manage your overall savings plan.
At Colonial Bank, we’re committed to helping you make confident financial decisions with tools and services that support your savings goals.
Colonial offers a variety of CD terms that make it easy to build a ladder that fits your needs. Whether you’re looking for short-term CDs or want to start with a longer-term option, you’ll find fixed-rate products with straightforward terms and no surprises.
We also periodically offer CD special rates that may align well with certain laddering strategies. You can speak with a banker about current options or view available rates online.
Our team takes the time to understand your goals and can help you explore whether CD laddering is a good fit for your savings plan. Simply get in touch or visit during office hours. We can walk you through available terms, explain how each product works and support you in building a ladder that matches your comfort level. When you choose to partner with us, you benefit from practical guidance given without pressure and always in your best interest.
With Colonial Online and our mobile banking app, you can view your CD accounts, track maturity dates and set alerts for upcoming changes. You’ll always know where your money stands and what your options are as each CD matures.
This helps take the guesswork out of managing a ladder and lets you stay in control from anywhere.
CD laddering is a simple, structured savings approach that gives you access to your funds over time while maintaining stability and consistent growth. By staggering maturity dates across several CDs, you create a savings plan that’s both flexible and dependable.
At Colonial, we offer the tools, account options and personalized service that make it easier to build and manage a CD ladder that fits your timeline and goals. If you’re interested in exploring this strategy further, our team is here to help you get started.
Visit your nearest Colonial banking center or apply online to learn how our CD options can support your financial journey.
