CD Ladder Calculator

This CD Ladder Calculator will allow you to compute how much you can earn by staggering your investments in a mix of short- and longer-term certificates of deposit in order to maximize returns while still maintaining a degree of liquidity allowing you to access funds if needed. To use this tool you will need to enter your initial deposit amount, the number of months the CD holds the deposit for, and the CD's interest rate. After entering these amounts you will see the results graphed. You will also get a print out of the total annual yield, the annual percentage yield, and the ending balance.

CD Ladder Calculator Overview

A CD ladder is an investment strategy designed let you enjoy the best of both worlds: the liquidity of short-term CDs and the higher returns of long-term CDs.

CDs are regarded as a very safe type of investment, as your returns are guaranteed. On the downside, the returns on CDs are relatively low, compared to other investments with higher risk – often less than 1 percent a year.

CDs typically range in length from three months to five years, though some may run as long as 10 or even 20 years. Longer-term CDs pay higher interest rates than short-term ones do – a five-year CD may pay an interest rate double that of a one-year note. However, a long-term CD keeps your money locked up for a long time – you can't get at it for five or 10 years, or however long it takes the note to mature.

To get around that, a CD ladder strategy involves dividing your money up among several CDs with different maturity lengths. For example, if you have $50,000 to invest, you might put $10,000 each into a 1-year, 2-year, 3-year, 4-year and 5-year CDs, each with gradually increasing interest rates.

This will give you a significantly better return than simply investing it all in a 1-year CD. At the same time, you still have access to one-fifth of your money every year. That way you're not locked in if you need the money, if rates rise or if some other better investment comes along.

Not only that, but at the end of the first year you can reinvest the returns from your one-year CD into a new 5-year CD. Keep doing this every year and after four years you'll have all your money in 5-year CDs earning 5-year rates, but with one of them maturing every year! So you can earn five-year rates while still being able to access part of your money every year.

Using the CD Ladder Calculator

To use this calculator, you will need the amount you wish to invest and interest rates and other information about the CDs you wish to invest in.

The calculator will allow you to spread your investment over up to 10 CDs with different interest rates and durations. Maturity dates will be spread evenly among them according to the Frequency of Maturity option you choose in the calculator.

Note that in addition to interest rates, you will need to know how often interest is compounded on the group of CDs you choose. This information is available from the financial institutions offering CDs; note that the compounding schedule can have a significant impact on what a CD will earn.

Enter your information in the fields indicated. If you have questions about any particular entry, clicking on the name of the field will provide more information.

When you are done, the calculator will show how much you would earn by laddering your CDs and how much more you would earn than if you had simply put all your money in the shortest-term CD of the options you chose.

Clicking on "View report" will give you your total earnings at the end of the period specified, as well as tables breaking down your earnings and comparing your CD ladder earnings vs. short-term CDs.