CD ladder yield calculator

CD ladder math — five buckets, one yield

A CD ladder splits your principal across maturities (1, 2, 3, 4, 5 years), so one rung matures every year. Mature money either funds a need or rolls into a new 5-year rung at the prevailing rate.

Why ladder instead of single 5-year CD

• Liquidity: 20% becomes available every year without breaking-CD penalties
• Reinvestment hedge: rolls captured at current rates — protects against rate drops AND captures rate rises
• Yield blend: typically lands between 1-year and 5-year rates

Why ladder instead of HYSA

• Locked rate — HYSAs can drop their rate any day; CD rate is fixed for the term
• Higher yield in normal yield curves (1Y < 5Y CD usually)
• Forced discipline — early withdrawal penalties (typically 3-12 months interest) discourage impulse spending

When ladder loses

• Inverted yield curve: when 1Y > 5Y, ladder underperforms a 1Y CD or HYSA
• Rising rate environment: ladder is locked in at lower rates while HYSA tracks up
• Need full liquidity: any unexpected need before maturity loses 3-12 months interest

How to build

1. Divide principal by 5 (this calc shows per-rung amount)
2. Buy 1Y, 2Y, 3Y, 4Y, 5Y CDs simultaneously
3. As each matures, roll into a new 5Y CD
4. After year 5, you have a steady-state 5-CD portfolio with one maturing annually at the 5-year rate

Brokered vs bank CDs

• Brokered CDs (Fidelity, Schwab, Vanguard): trade on secondary market, can sell early without "penalty" (but at market price), wider rate selection
• Bank CDs: simpler, FDIC-insured directly, fixed early-withdrawal penalty if needed

For ladders, brokered is usually more flexible. For absolute simplicity, bank CDs at a bank you already use.