The best way to maintain the liquidity of your savings, boost yield and protect yourself against rapid rate changes is to stagger the maturity dates of your CDs.
Sometimes called "laddering," staggering maturities is really a form of diversification. You spread your money over several different maturities: say, one-fourth of your CD funds in certificates maturing in three months, one-fourth in CDs maturing in six months, one-fourth in CDs maturing in a year and one-fourth in CDs maturing in two or three years. (A profitable rule of thumb based on the history of interest-rate movements: If five-year CD rates ever reach 10% again, stock up on them.)
Normally, longer maturities pay more interest, so why not just concentrate on those?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In fact, that would be a splendid strategy if you could accurately predict the direction of interest rates and your prediction was that they were going to fall. But what if they rise?
By staggering your maturities, you have protected yourself in either case. If rates rise, your short-term CDs will mature in time for you to reinvest the principal at the new, higher rates. If rates fall or stay flat, you'll be sitting pretty because you've locked in the current two- or three-year rate. By the time those certificates mature, rates could well have turned in the other direction again.
If you're willing to sacrifice some of your yield for a little less work, consider either money-market mutual funds or money-market deposit accounts. But before we look at these accounts, let's take a closer look at the money market itself.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
What to Expect from the Global Economy in 2026The Kiplinger Letter Economic growth across the globe will be highly uneven, with some major economies accelerating while others hit the brakes.
-
Shoppers Hit the Brakes on EV Purchases After Tax Credits ExpireThe Letter Electric cars are here to stay, but they'll have to compete harder to get shoppers interested without the federal tax credit.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Banks Are Sounding the Alarm About StablecoinsThe Kiplinger Letter The banking industry says stablecoins could have a negative impact on lending.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
After Years of Stagnant Growth, Hope Emerges for EU EconomyThe Kiplinger Letter Can a German fiscal push outweigh French political peril?
-
Trump's Economic InterventionThe Kiplinger Letter What to Make of Washington's Increasingly Hands-On Approach to Big Business
