According to the CME FedWatch Tool, analysts predict a 91.7% chance of the Fed cutting rates at its Sept. 17 meeting — and more cuts could follow. Certificate of deposit (CD) rates are already on the decline — and if interest rates fall, CD rates will likely fall even further.
That makes the next few weeks an important window for savers. To earn more on your cash while still keeping some flexibility, I recommend locking in today’s higher rates by building a CD ladder. Here’s how.
What a CD ladder is (and why it works)
A CD ladder is a way of splitting your money into CDs of different lengths. Instead of putting all your cash into one CD, you divvy it up and stagger it.
Here’s why people do it:
- CDs offer a guaranteed rate of return.
- CDs with different term lengths will keep money coming back to you at regular intervals.
- CD ladders offer flexibility — when a CD matures, you can either add to the ladder by reinvesting it or take your cash (and earnings) back.
For example, someone with $10,000 could split it across 6-month, 12-month, 18-month, and 24-month CDs. When the 6-month CD matures, your money becomes available to spend or reinvest — then the 12-month CD, then the 18-month CD, and so on.
Usually, it makes sense to split your money evenly across CDs — but here’s why you might want to use a weighted CD ladder instead.
Why a weighted ladder makes sense now
With interest rates expected to fall, consider weighting your ladder toward longer-term CDs. This way, you can secure higher earning rates for the next few years and protect your money against future rate cuts.
Here’s how someone might split $20,000 across multiple CDs, emphasizing longer terms while keeping some short-term flexibility:
|
CD Term |
Amount |
APY |
Interest Earned |
|---|---|---|---|
|
6 months |
$2,000 |
4.00% |
$40 |
|
12 months |
$2,000 |
4.00% |
$80 |
|
18 months |
$4,000 |
4.00% |
$240 |
|
2 years |
$6,000 |
4.00% |
$480 |
|
3 years |
$6,000 |
4.00% |
$720 |
Data source: Author’s calculations.
That’s a total of $1,560 in interest by the time the ladder matures, more than you’d get by repeatedly opening short-term CDs at declining rates. You also get access to a portion of your savings every six to 12 months, so your money stays accessible.
Act now before rates fall
There’s no one right way to build a CD ladder. You can space them out however you like and invest as much as you want in each one. If you want to protect your money against rate cuts, though, a long-term weighted CD ladder is worth considering.
The most important thing is to act before rates fall further. By saving with longer-term CDs now — and making them part of a CD ladder — you give yourself flexibility while locking in an APY that might not be available again for years.
Read to get started? Check out our full list of the best CDs available now and build your CD ladder today.