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CD Ladder

A CD ladder splits your cash across multiple certificates of deposit with staggered maturities (e.g., 1, 2, 3, 4, 5 years). As each CD matures, you reinvest it in a new long-term CD — providing regular liquidity and smoothing interest-rate changes.

By the TRRP Editorial TeamUpdated 2026SSA · IRS · CMS data

Definition

A CD ladder splits your cash across multiple certificates of deposit with staggered maturities (e.g., 1, 2, 3, 4, 5 years). As each CD matures, you reinvest it in a new long-term CD — providing regular liquidity and smoothing interest-rate changes.

Why it matters in retirement

For retirees who want FDIC safety with higher yields than savings accounts, a CD ladder offers predictable cash flow and protects against reinvestment risk. But Treasury ladders are usually simpler, more tax-efficient, and equally safe.

Key numbers · 2026
5-yr CD yield (recent)
~4.2%
1-yr CD yield (recent)
~4.5%
FDIC insurance limit
$250K per depositor per bank
Early withdrawal penalty
3–6 mo interest typical
Pros
  • FDIC insured
  • Predictable yield
  • No market risk
  • Regular liquidity from maturing rungs
Cons
  • Early withdrawal penalties
  • Less tax-efficient than Treasuries (state tax)
  • Interest taxed annually
  • Reinvestment risk if rates fall

Common mistakes

  • Using a CD ladder instead of a Treasury ladder in high-tax states
  • Buying brokered CDs without understanding the secondary market liquidity
  • Breaking CDs early and paying penalties for non-emergencies
  • Not spreading across banks for FDIC coverage
The part most people miss

A Treasury ladder accomplishes everything a CD ladder does — with no state income tax, zero credit risk, and a liquid secondary market if you need to sell early. For most retirees, Treasuries are the better tool.

When you’re ready

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