What Is a CD Ladder and When Is It a Good Idea?

CD, guaranteed return. Investing, gambling.

I know there will be those that disagree.. but my CD Ladder for my Emergency Fund was 60 months long(5 years).. The individual CDs were small admittedly.. But they were are the perfect size to close early for emergencies since emergencies are never the same size. The EWP was typically only a few months to as much as a year of "interest" so selectively picking the CDs needed was an easy decision since it was probably held 2-3 time longer than the EWP.

Right now a 4 Teer Cd for 1 year is paying 5.30% per quarter. Never do it longer than that. You can take each quarter and cash out plus the earnings and either roll it or cash out and decide what you want to do with your money. I'm doing this with $250K right now because I no nothing about stocks investing and don't have a adviser. I also have a hefty 401 through work with Fedility.

Good explanation why it's less advantageous that it used to be, with today's common 5%+ APY yields. If rates fall you lose the advantage of a ladder. It also seems confusing for DIYS taxes to keep track of all those moves.

My financial advisor conned me into buying a two year 1.6% brokerage CD in March 2022 despite all the chatter about rates continuing to go up. My financial advisor is with DA Davidson. He's just a damn salesman with his best interest in mind. BTY, he talked me into a $240,000 CD. I trusted this company 😪

I think a CD ladder is useful, but I don't ladder the way described. Every month I purchase a one year CD so that after twelve months I now have a CD that is coming due every month. That way, if I have an emergency where I need the money - I have it. If I don't need the money I purchase another one year CD. I also have the option to add to the amount of money I am using to re-purchase the CD each month. CDs typically have had higher interest rates than a standard passbook savings account so I try to take advantage of that.