How a CD ladder works
Instead of putting $25,000 into one CD, a 5-rung ladder puts $5,000 each into 1-, 2-, 3-, 4-, and 5-year CDs. Every year a rung matures, giving you a penalty-free exit or cash to spend. To keep the ladder rolling, reinvest each maturing rung into a new 5-year CD — after the first cycle, every dollar earns the (usually higher) long-term rate while you still get access to a fifth of the money every year.
Blended APY and the worked example
The ladder's blended APY is the average of the rungs. With rates of 4.30%, 4.10%, 4.00%, 3.95%, and 3.90%, the blend is 4.05% — below the best 1-year rate today, but the ladder's point is protection in both directions: if rates fall, your long rungs stay locked in high; if rates rise, next year's maturing rung reinvests at the new higher rate. You trade a sliver of yield for never being fully wrong about rates.
When a ladder beats the alternatives
A ladder suits money you want fully safe with better yield than savings and scheduled access — house down payment in a few years, a known tuition bill, retiree cash buckets. Skip the ladder if you might need everything on short notice (high-yield savings wins) or if the horizon is 10+ years (stocks have historically beaten CDs by a wide margin). Check that each CD is within FDIC/NCUA limits: $250,000 per depositor, per bank.
How to use this calculator
Enter the total you want to lock up, choose a 3- or 5-rung ladder, and enter the current APY for each term from a bank or credit union's CD rate sheet. The calculator divides the money evenly, shows each rung's maturity date and value, and computes the blended APY across the whole ladder. Use it to compare a ladder against a single long CD or a high-yield savings account: the ladder usually yields a bit less than the best long rate but gives you a maturing rung — penalty-free cash — every year. Keep each CD under the $250,000 FDIC/NCUA insurance limit per bank, and set calendar reminders for the short grace window when each rung matures so it doesn't auto-renew into a rate you didn't choose.