Here’s why a CD laddering strategy makes sense right now

Certificate of deposit (CD) accounts offer savers a relatively easy and reliable way to grow their money. Simply deposit a certain amount into an account, let it sit untouched for the full CD term (ranging from months to years) and enjoy a sizable return on your money once the account has matured. And this has been even easier to do from 2022 to 2025, as interest rates on CD accounts surged exponentially, making it an obvious choice for savers looking to blunt the impact of inflation and higher borrowing costs felt elsewhere.

But the economy is once again changing. Rates are lower than they were one year ago and they’re positioned to decline again this fall if the Federal Reserve issues additional rate cuts as expected. While CD rates remain high and accounts largely remain favorable options for many savers, these savers could benefit from a more strategic approach now versus the recent past. 

And that’s where CD laddering comes into play.

With this savvy approach, savers open multiple CDs with varying terms. This gives them flexibility as they will continuously have access to some portion of their money while still taking advantage of the high rates being offered now. So, for example, you’d put $5,000 into a 3-month CD, $2,500 into a 6-month CD and another $2,500 into a one-year CD, thus locking in today’s high rates but not with so much money or for so long that it becomes cost-prohibitive. And, in today’s unique economy, a laddering strategy makes more sense than usual. Below, we’ll explain why that is.

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Here’s why a CD laddering strategy makes sense right now

While the effectiveness of a CD laddering strategy will vary based on the individual saver, there are multiple reasons why it could be broadly advantageous if implemented right now.

For starters, interest rates on CDs remain elevated, even if they’re not quite as high as the plus-5% many savers were able to secure in 2023 or 2024. But with rates on short-term CDs generally higher than those on long-term ones (a reversal from historic trends), savers will need to spread their money out amid a mix of terms to secure both higher rates and greater interest earnings over time. And they’ll want to do so relatively quickly.

With the likelihood of a Fed rate cut looming for September and the reality that a lower rate there will inevitably lead to lower CD rates, now is a smart time to lock in a few high rates while still readily available. Remember that banks and lending institutions don’t need to wait for formal Fed rate-cutting action to reduce what they offer to savers, especially as the chances of a rate cut grow. So, taking a “wait and see” approach could be costly right now and unnecessary if you strategically ladder your funds into a handful of top CD accounts.

This all being noted, CDs aren’t a flexible savings tool. That high rate is offered in exchange for foregoing access to your funds for an extended period (or risk having to pay an expensive early withdrawal penalty to regain access). And in today’s unpredictable economic landscape, in which inflation just rose again and interest rate cuts have been paused all year, it’s critical to maintain some level of flexibility. 

A CD laddering strategy helps in that sense, too, as you can secure CDs with terms of three months (or maybe less), giving you back access to your funds within a relatively small period of time. You can then pivot your savings strategy as needed, versus being locked in with an account for multiple years.

The bottom line

In the constantly evolving and difficult-to-predict economic climate of 2025, savers will need to be judicious in their approach. A CD laddering strategy, however, has multiple timely advantages worth exploring. Just be sure to use this strategy in a way that can both meet your goals and budget, as depositing too much money into an account that you ultimately need premature access to can easily negate all the time, effort and money you started with.