Things might be changing soon for savers. Kiplinger Investing for Income editor Jeffrey Kosnett recently said: "You might be wise to lock in Treasury-bill and CD ladders sooner rather than later."
The reason? Rates on CDs are still high, with many terms earning you over 4%. However, those rates might be coming down in the future if the Fed decides to cut interest rates.
And that's becoming more of a reality. CNBC conducted a survey of economists, fund managers and analysts, and 65% believe a rate cut will happen this year on account of a wobbling economy. This is up from 44% in March, so it's clear a shift is starting to happen.
Sign up for Kiplinger’s Free E-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.
If a rate cut happens, it means you only have a narrow time to lock in a higher rate of return. Take a look at how a CD ladder allows you achieve long-term financial growth, with the flexibility to pivot investments as you see fit.
How does a CD ladder work?
A CD ladder is a savings strategy where you don't put all of your eggs into one basket. You essentially open multiple CD accounts, but not at the same time.
To demonstrate, say you have $100,000 to devote to savings. You could put it all in a jumbo CD and earn 4.50% with some accounts. But what if you want to diversify?
With a CD ladder, you would instead spread your investments out, like this:
- $20,000 in a one-year CD
- $20,000 in a two-year CD
- $20,000 in a three-year CD
- $20,000 in a four-year CD
- $20,000 in a five-year CD
The goal of this approach is to stagger maturity dates. That way, you have access to some cash if you need it, while also having the flexibility to take everything earned on a CD and reinvest it to continue climbing the ladder.
The other benefit of a ladder is there's not one specific way to do it. You could start with a few CDs to see how you manage and continually add more from there. That also gives you opportunities to see where rates stand in a moment of uncertainty.
Using this Bankrate tool, you can find CDs to start this approach:
What to consider with a CD ladder
A CD ladder requires more maintenance than a normal CD. As you approach one maturity date, you'll have to decide what to do with your cash from there. And the more CDs you have, the more you'll have to do this.
Some banks and credit unions will automatically renew your CDs unless you set a plan with them. Therefore, make sure to set a reminder on your phone a few weeks before the maturity date, as it will give you ample time to research whether to keep your money in one or try another option.
Another thing to keep in mind is inflation. While you can earn a good rate of return on a five-year CD now, we also don't know how the trade wars and other policies will impact inflation moving forward. If inflation does rise enough, it would lower the purchasing power on what you earn with a CD.
On the other hand, if the Fed does cut rates sometime this year, it's vital to start your CD ladder sooner than later to take advantage of the higher rates.
Some of my top CD recommendations
Along with the Bankrate tool, here are a few CD recommendations that can help you build your ladder:
Bank | CD Type | APY | Min. Deposit |
|---|---|---|---|
6-month CD | 4.50% | $50,000 | |
1-Year CD | 4.40% | $5,000 | |
6-month Jumbo CD | 4.40% | $50,000 | |
2-Year CD | 4.28% | $500 | |
5-Year CD | 4.25% | $500 | |
4-Year CD | 4.20% | $500 | |
3-Year CD | 4.00% | $0 |
Now is an excellent time to start a CD ladder, especially if there might be rate cuts later this year. With a CD ladder, you'll be able to diversify your savings to help you reach your goals.
This approach also gives you a chance to change up CDs as you need to maximize savings. Just remember to set reminders on when each CD matures, as it gives you time to decide where to park your cash next.
Related content
-
AI-Powered Smart Glasses Set to Make a Bigger SplashThe Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.
-
How to Plan the Perfect Italian Dream Trip After 60Proper preparation is everything for U.S. retirees when planning an Italy "trip of a lifetime."
-
How to Plan the Perfect Italian Dream Trip After 60
Proper preparation is everything for U.S. retirees when planning an Italy "trip of a lifetime."
-
I Let AI Plan My Next Vacation. The Results Were Unexpected.Some people are turning to AI tools instead of travel planners for their trips — and it does have its perks.
-
My First $1 Million: Retiree, 63, Chicago Metro AreaEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Do You Need Flood Insurance? I'm an Insurance Expert, and Here's Where You Can Get ItStandard homeowners insurance does not cover flood damage, so you might need separate flood insurance, which you can get either through FEMA or private companies. Here are the details.
-
I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College GradCollege grads can help set themselves up for financial independence by focusing on emergency savings, opting into a 401(k) at work (if it's offered) and disciplined, long-term investing.
-
3 Things Dave Ramsey Says to Stop Buying — and 2 That Are Worth ItDebt-free living starts with smart choices. Here's what Ramsey says to avoid and where your money is well spent.
-
Five Big Beautiful Bill Changes and How Wealthy Retirees Can BenefitHere's how wealthy retirees can plan for the changes in the new tax legislation, including what it means for tax rates, the SALT cap, charitable giving, estate taxes and other deductions and credits.
-
This is the Best CD to Get Amid Rate UncertaintyThis CD helps you earn more than 4%, with quick access to your cash if you need it.
