CD Ladder Calculator
Plan a CD ladder strategy by splitting your investment across multiple CDs with staggered maturity dates to maximize interest and maintain liquidity.
A CD ladder is a savings strategy where you split your money across multiple Certificates of Deposit (CDs) with different maturity dates — so a portion matures regularly while the rest earns higher long-term rates.
Core formula (CD future value): FV = Principal × (1 + Rate/n)^(n × t) where n = compounding periods per year, t = years to maturity.
For a standard CD compounding daily (n = 365): FV = Principal × (1 + APY/365)^(365 × t)
What each variable means:
- Principal: the amount deposited in each CD rung.
- APY (Annual Percentage Yield): the effective annual return after compounding, as disclosed by the bank. Always compare using APY, not APR.
- t: time to maturity in years. Longer terms typically earn higher APY.
- n: compounding frequency. Daily compounding is most common for CDs.
- Maturity Date: when the CD terminates and returns principal + interest.
Example: 5-rung CD ladder with $25,000 total:
| Rung | Amount | Term | APY | Matures | Value at Maturity |
|---|---|---|---|---|---|
| 1 | $5,000 | 1 yr | 4.5% | Year 1 | $5,225 |
| 2 | $5,000 | 2 yr | 4.8% | Year 2 | $5,490 |
| 3 | $5,000 | 3 yr | 5.0% | Year 3 | $5,788 |
| 4 | $5,000 | 4 yr | 5.1% | Year 4 | $6,094 |
| 5 | $5,000 | 5 yr | 5.2% | Year 5 | $6,427 |
Total at end of Year 5: ~$29,024 — $4,024 in interest on $25,000.
Why ladder vs. single long-term CD:
- Liquidity: one rung matures every year; you access money without penalties.
- Rate flexibility: if rates rise, you reinvest maturing CDs at higher rates; if rates fall, your locked-in long-term CDs still earn the older higher rate.
- Penalty avoidance: early withdrawal penalties (typically 90–180 days interest) are avoided because you plan around maturity dates.
FDIC insurance: Each CD at a federally insured bank is covered up to $250,000 per depositor, per institution, per ownership category.
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