How To Create & Use a CD Ladder in Your Savings Strategy

Building a smart savings strategy is all about balance—earning solid returns, managing risk and keeping access to your money when you need it. High yield savings and money market accounts offer flexibility, while certificates of deposit (CDs) usually deliver higher interest rates, making them ideal for long-term growth.

But locking all your funds into one long-term CD can backfire, tying up your cash and leaving you exposed to interest rate swings.

That's where a CD ladder comes in. This approach allows you to spread your savings across multiple CDs with staggered maturity dates, providing both steady growth and periodic access to your funds. It's a simple, effective way to build stability and flexibility into your savings plan.

“People sometimes say a downside of a CD is the lack of liquidity. Laddering allows for more liquidity," said Pierre Habis, General Manager & Head of Synchrony Bank. “Instead of putting the entire amount in one CD, you break it up into terms."

Here's how CD ladders work and how to use them to make your money work harder for you.

What Is a CD Ladder?

A CD ladder is a savings strategy that involves opening several certificates of deposit (CDs) with different maturity dates. Rather than a single bank product, it's a structured approach to balancing access to your cash with the higher returns that CDs typically offer.

Each “rung" of the ladder represents an individual CD account, each with its own interest rate and maturity schedule. For example, you might divide your savings across a few CDs—one that matures in three months, another in six months, and another in a year. Together, these accounts form your CD ladder.

READ MORE: What Is a Certificate of Deposit (CD) and How Does It Work?

How Does a CD Ladder Work?

CD ladders function just like regular CDs, but instead of locking all your funds into one term, you spread them across multiple CDs with staggered maturity dates—ranging from as short as three months to as long as five years.

When one CD matures, you can either withdraw the cash or reinvest it into a new long-term CD at the latest rate. This system keeps your money working for you while ensuring that portions of it become accessible on a regular schedule.

It's a flexible alternative to putting all your savings into a single CD account. You maintain ongoing access to funds, minimize the risk of early withdrawal penalties and still capture the higher yields of longer-term CDs.

If you want even more wiggle room, some banks like Synchrony offer no-penalty CDs that let you withdraw funds early without a fee starting seven days after you open the CD.

CD ladder example

Your CD ladder will depend on your savings goals and timeline, but here's a simple example of how one might work in practice.

Let's say you have $15,000 you want to keep in an FDIC-insured deposit account. You decide to split it evenly across five CDs with terms ranging from one to five years. Each CD has a slightly different annual percentage yield (APY), which is how much interest you'll earn each year.

At the end of the first year, your one-year CD matures. You can either cash out the $3,063.66 or reinvest it into a new five-year CD to keep your ladder going. If you keep reinvesting as each CD matures, your earnings can compound over time.

Here's what your ladder might look like after several renewal cycles if you continue reinvesting each CD as it matures:

Over time, your total earnings could grow by more than $3,000 in interest, all while your principal stays protected in an FDIC-insured account. That's the beauty of a CD ladder: It lets your money grow steadily without taking on extra risk.

Why Use a CD Ladder in Your Savings Strategy?

A CD ladder is a simple and smart money move that helps you earn solid returns, stay flexible and avoid getting stuck with bad timing on interest rates. Here's how it helps.

You get safe and reliable growth

Unlike stocks or other market investments, CDs have fixed rates, which means you know exactly how much you'll earn. If your financial institution is FDIC-insured, your money is protected. No surprises, no roller coasters.

You don't get trapped at a mediocre rate

Putting all your cash into one long-term CD can backfire if rates go up later. With a ladder, your money is split across several CDs that mature at different times. As each one comes due, you can grab a better rate if the market has improved.

You get regular access to your cash

Because your CDs mature on a schedule—say every few months—you'll always have some money becoming available. That way, you can tap your savings without paying early withdrawal penalties.

You can take advantage of rising rates

Every time a CD matures, you can reinvest at the current rate. If rates go up, you'll catch those gains. If they drop, your longer-term CDs keep earning at the higher rates you locked in earlier. Some banks like Synchrony even offer bump-up CDs that let you raise your rate once during the term for extra flexibility.

Step-by-Step Guide: How To Build a CD Ladder

Thinking about trying a CD ladder? Here's how to set one up, step by step:

1. Assess your savings goals and timeline

How much money do you want to put into your CD ladder? How long do you want it to last? Think about when you might need the cash, like for a down payment, home renovation project or tuition payment. Your timeline will help you figure out how long each CD term should be.

2. Choose your CD terms

Your goals and liquidity needs will guide how you space out your maturity dates. CD terms typically range from as short as three months to as long as five years. By staggering those terms, you'll have CDs maturing at regular, predictable intervals—so you can access funds periodically instead of locking everything away at once.

3. Divide your funds among the “rungs"

Many people split their total investment evenly across each CD in the ladder. For example, if you have $10,000 and want to build a five-year ladder, you could put $2,000 into CDs that mature in one, two, three, four and five years. Each CD becomes a “rung" on your ladder, giving you a steady cycle of maturing funds.

4. Open your CDs

Compare rates from different banks and credit unions before you buy. Online banks often offer higher yields than traditional ones. Check the annual percentage yield (APY) and make sure each institution is FDIC-insured (for banks) or NCUA-insured (for credit unions).

Synchrony Bank has a variety of CD types, like high yield and no-penalty CDs, that can fit neatly into a ladder setup. Check our current rates and terms online.

5. Make a plan for maturity

When a CD reaches the end of its term, you can roll the funds into a new CD to keep the ladder going or withdraw the money if you need it. Reinvesting helps you maintain your ladder and take advantage of any rate increases.

READ MORE: What Should You Do When Your CD Matures?

Tips To Maximize Your CD Ladder Strategy

Here are a few ways to get the most out of your CD ladder and make it work harder for your savings goals.

1. Compare interest rates before reinvesting

When a CD matures, don't just renew it automatically. Take a moment to compare rates across banks and credit unions to make sure you're getting the best yield available. Online banks like Synchrony often offer more competitive APYs, so it pays to look around before you reinvest.

2. Don't cash out early

Try not to dip into your CDs before they reach maturity. Early withdrawals can wipe out months—or even years—of earned interest, defeating the purpose of your ladder.

If you think you might need to access your cash, shorten your CD terms or consider adding a no-penalty CD into the mix. Or keep a chunk of savings in a high yield savings account.

3. Mix it up with other savings vehicles

A CD ladder works best as part of a balanced savings plan, not your only one. Keep an emergency fund in a high yield savings account for short-term needs or unexpected expenses. You can also use tax-advantaged accounts like 401(k)s and IRAs to grow your long-term savings for retirement. This layered approach helps you stay flexible today while building wealth for tomorrow.

What To Consider Before Building a CD Ladder

While CD ladders are an effective strategy, there are potential drawbacks and considerations to be aware of.

Lower risk = lower returns

CDs are safe and predictable, but that stability comes with a trade-off: Returns are typically lower than what you might earn from stocks or bonds. If you're focused on long-term growth and comfortable taking on more risk, CDs might not give you the results you're after.

Inflation can shrink purchasing power

When inflation outpaces your CD's interest rate, your money's buying power slips over time, even though the balance technically grows. It's not a deal breaker, but it's something to factor in if you're locking in rates for several years.

Your money is locked in

Cashing out early can trigger penalties that eat away at your earned interest and throw off your ladder's rhythm.

Lost opportunity if rates rise

If interest rates rise after you've locked your money into a CD, you could miss out on better returns. For instance, if you open a three-year CD at 4% and rates jump to 5% the following year, your funds remain stuck at the lower rate until maturity. That's the trade-off for the predictability CDs offer. Some savers opt for bump-up CDs—which allow a one-time rate increase during the term—to soften the sting of rising rates.

Declining returns if rates fall

The flip side is when interest rates drop. If that happens, maturing CDs may have to be reinvested at lower rates, which can gradually pull down your overall earnings. Even so, your longer-term CDs will keep earning at the higher rates you locked in earlier. So while falling rates can limit future growth, they won't undo the returns you've already secured.

“Generally speaking, the interest rate environment is not as strong today as it was [over] a year ago in 2024," Habis said. “If the rate environment is going lower, this is where many customers will lock in a longer-term CD. We have a number of customers who have long-term CDs up to five years."

Should I Build a CD Ladder?

A CD ladder can help grow your savings. But before you start opening a stack of new CD accounts, take a step back and think about your bigger financial picture: your short-, medium- and long-term goals. A CD ladder works best when it fits naturally into your broader plan and cash flow needs. Ask yourself:

• How much of my savings do I want to invest?
• How soon will I need this money?
• Does this support my overall savings goals for today and the future?

The key to building an effective CD ladder is choosing a structure that fits your life—and being open to adjusting it as your goals change. One of the biggest advantages of a CD ladder is its built-in flexibility: You can refine your strategy over time as rates shift or your priorities evolve.

“People with CDs generally have good discipline," Habis said. “They have a good sense of their plan and what they want, and they go in confident with a CD. We applaud them for that."

Want to explore current CD rates and see what options might fit your ladder? Check out what Synchrony Bank has to offer.