Certificates of deposit

CD ladder

Name: Pacific Structured Assets, Inc.
Address: 2626 Foothill Blvd, Ste 200, La Crescenta, CA, 91214, US
Telephone: (800) 928-7680

A CD ladder splits one sum across several certificates of deposit that mature on staggered dates — five equal pieces coming due one, two, three, four and five years from now. Something matures every year, so you keep money coming back on a schedule without giving up the higher rates longer terms usually pay.

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Definition

What is a CD ladder?

A CD ladder is a set of certificates of deposit bought at the same time but with different maturity dates, so they come due one after another instead of all at once. Each CD is a rung. The point is to hold longer-term CDs, which usually pay more, while still having money come free at regular intervals.

It exists to settle an argument you would otherwise have to win by guessing. A one-month CD keeps your money available and pays almost nothing; a five-year CD pays more but takes the money off the table, and breaking it early costs months of interest. A ladder refuses to choose. Most of the balance sits in the longer terms, and one rung is always close to maturing.

Every rung is an ordinary bank CD, which matters for what a ladder is and is not. Deposits at an insured institution are protected by the FDIC up to 250,000 dollars per depositor, per insured bank, per ownership category, and that insurance is backed by the full faith and credit of the United States government. The rate on each rung is fixed in writing for that rung's term. What is not fixed is the rate you will get on the next rung — which is the whole subject of the second half of this page.

Mechanics

How CD ladders work, rung by rung

Divide the money into equal pieces and buy one CD at each maturity you want to cover. When the shortest rung matures, take the cash if you need it, or buy a new CD at the longest term on the ladder. Repeat, and after one full cycle every rung is earning the long-term rate while one still matures every year.

That last sentence is the part most explanations skip, and it is why laddering works at all. In year one the ladder holds a one-, two-, three-, four- and five-year CD, so it earns a weighted blend of those five rates rather than their simple average — the longer rungs commit more of your money for longer, so they count for more. In year two the shortest rung is gone, replaced by a fresh five-year. By year five every rung is a five-year CD bought in a different year: the ladder earns close to the five-year rate and still hands back a fifth of the money every twelve months. You reach the long rate by waiting, not by locking.

Rolling also averages your entry points. You end up holding five vintages of the five-year rate rather than whatever it happened to be on the day you funded the account — dollar-cost averaging applied to interest rates, and the honest answer to whether you should wait for rates to rise before locking in.

Spacing is a dial, not a rule. Twelve months apart is the default; six or three months brings cash back sooner and blends to a slightly different rate. You can see any spacing priced out rung by rung in the ladder builder, and the step-by-step version of the setup is on how to build a CD ladder.

Worked example

A CD ladder example at today's published rates

Take $50,000, split it five ways, and buy one CD at each year from one to five. Priced at the FDIC national average for each term from the July 2026 release, that ladder returns $2,102 of interest over five years and blends to 1.38% a year across the whole thing.

Swipe sideways for the full table →

Rung	Term	FDIC national average APY	Amount	Value at maturity	Matures
Rung 1	12 months	1.68%	$10,000	$10,168	Jul 2027
Rung 2	2 years	1.56%	$10,000	$10,314	Jul 2028
Rung 3	3 years	1.34%	$10,000	$10,407	Jul 2029
Rung 4	4 years	1.26%	$10,000	$10,514	Jul 2030
Rung 5	5 years	1.36%	$10,000	$10,699	Jul 2031

Source: FDIC National Rates and Rate Caps, July 2026 monthly release

These are FDIC national averages (deposit-weighted) across every FDIC-insured institution, and the largest banks pay close to nothing on deposits while holding enormous balances, which drags the averages down. A well-shopped CD from a nationally available bank or credit union routinely pays materially more than the figure shown here. Read these as the middle of the market, not as a rate you have been offered. Compare them against real quotes on the FDIC National Rates and Rate Caps page, which is where these figures are published.

Read the APY column first. On the current FDIC national-average curve the one-year term pays 1.68% and the five-year pays 1.36%, so the long end is currently paid no better than the short end — the curve is flat to inverted, and a long rung is being asked to tie money up for five years without a higher rate to show for it. That shape changes; the ladder is built so that you do not have to predict when.

The blended figure is not the average of the five APYs. It is the effective annual rate tying the $50,000 you put in to every dollar that comes back, on the date it comes back, so the longer rungs carry more weight. Change the amount, the number of rungs or the spacing in the ladder builder and watch which number moves.

The case for it

What a CD ladder is actually good at

A ladder does three specific jobs: it takes the timing bet off the table, it turns a pile of money into a calendar, and it keeps the early-withdrawal penalty out of your life. Nothing about it is clever. That is the appeal.

It removes the timing bet

You are not deciding whether today is a good day to lock in for five years. A fifth is committed at today's long rate; the rest reaches its decision point in later years. If rates rise you buy into them annually, and if they fall you already own the older, better rungs.

It creates a calendar

A maturity date is a planning object. A ladder gives you a known date each year when a known amount comes free without a penalty — which is what makes it a real fit for a property tax bill or the first years of retirement spending.

It avoids the penalty

Cashing a CD early typically costs three to twelve months of interest, and on a long CD it can eat more than you have earned. With a ladder, the answer to needing some of it is usually to wait for the next rung.

Variations

CD ladder strategies, and when each one fits

A CD ladder strategy is usually one of five shapes, and they are not interchangeable. What separates them is how much money is committed at any moment and how soon the next decision arrives. Pick the shape that matches when you will want the cash, not the highest headline rate.

Swipe sideways for the full table →

Strategy	How it is built	Fits when
Classic five-year ladder	Five equal rungs at 1, 2, 3, 4 and 5 years; each maturity buys a new 5-year CD	Money you will not need in a hurry, and you want the long rate without locking all of it away at once
Short or mini ladder	Four rungs at 3, 6, 9 and 12 months, rolling into new 12-month CDs	A cash reserve you may draw on, or a year when you expect rates to move and want to stay nimble
Barbell	Half the money very short, half at the longest term, nothing in the middle	You want the long rate on part of it and genuine near-term access on the rest, and have a view that mid maturities are poorly paid
Bullet	Several CDs bought at different times but all maturing on the same future date	A known bill on a known date — a tuition payment, a closing, a tax liability
Uneven or tilted ladder	Equal maturity dates, unequal amounts, weighted toward whichever term is paying best	The curve is lopsided and you want more money where the rate actually is

One more deserves a mention because banks push it: the no-penalty CD, which lets you withdraw after the first week without losing interest. It is a reasonable substitute for the shortest rung and always pays less than a comparable locked CD. That gap is the price of the option.

The honest read

What a CD ladder cannot do

A ladder spreads reinvestment risk across many dates. It does not remove it. Every rung eventually matures into an unknown rate, so nobody can tell you today what income the ladder produces in year six. If rates fall and stay low, each rung rolls down into that world one at a time.

The current numbers make the point. On the July 2026 FDIC release the five-year national average (deposit-weighted) is 1.36% against 1.68% at one year. Anyone who built a five-year ladder in a higher-rate era is re-buying each maturing rung into that curve now. Laddering made the transition gradual; it did not make it optional.

Three smaller limits are worth stating plainly. Interest on a CD is taxed as ordinary income, generally in the year it accrues rather than the year you receive it, so a taxable-account ladder produces a tax bill on money you have not yet touched. FDIC insurance stops at 250,000 dollars per depositor, per insured bank, per ownership category, so a large ladder has to be spread across institutions to stay covered. And a CD does not grow: it returns your money plus a stated rate, which after inflation and tax can be close to nothing.

None of that makes a ladder a bad instrument. It makes it a cash-management instrument — very good at keeping a known sum whole and available on a known date, and never designed to be the engine of a retirement income plan.

In context

How a CD ladder compares to the alternatives

The choice is rarely ladder or nothing. Backing, liquidity, and whether the rate is fixed are the three axes that actually separate the options.

Swipe sideways for the full table →

Option	Is the rate fixed?	Backing	Liquidity
CD ladder	Fixed per rung, for that rung's term only	FDIC-insured to 250,000 dollars per depositor, per bank, per ownership category	A rung matures on schedule; breaking one early costs interest
High-yield savings	No — the bank can change it any day	FDIC-insured on the same terms	Full; withdraw any day
Treasury bill ladder	Fixed per bill, for that bill's term only	Direct obligation of the U.S. government; no dollar cap	Full; bills trade on any business day
Bond ladder	Fixed per bond, for that bond's term only	Issuer credit; diversifiable across many issuers	Full; each bond is sellable, at a price that moves with rates
Court-approved payment stream	Set once at purchase, for the life of the schedule	Not a deposit and not FDIC-insured; one insurer's obligation	Limited; no public market, resale possible with our help but not guaranteed

A Treasury ladder deserves attention if yours is large: Treasury backing has no dollar cap and the interest is exempt from state income tax. You can price CD and Treasury rungs side by side in the ladder builder, and the wider ranking of income options sits on our fixed income alternatives page.

A different structure

Where a payment stream differs

If reinvestment risk is the part of laddering that bothers you, it is worth knowing what the opposite structure looks like. Pacific Structured Assets places court-approved secondary-market payment streams: you buy the right to receive a fixed, already scheduled set of payments at a discount, so the estimated yield is set once, at purchase, for the life of the schedule. Nothing matures and nothing is reinvested — the schedule simply runs.

That is the opposite trade, and it costs you the two things a CD ladder is best at. A payment stream is not a bank deposit and not FDIC-insured, and it is not an annuity, an insurance product, or a registered security. It leans on a single insurer's obligation rather than federal deposit insurance. And its liquidity is limited: there is no public market and no daily price, though resale or reassignment to another buyer may be possible with our assistance, at a price that is not guaranteed and moves inversely with prevailing rates. Estimated yields run roughly 4 to 7 percent effective.

So it is not a CD substitute, and we would not present it as one. The two are often held together: a short CD or Treasury ladder for money that must stay insured and reachable, and a payment stream for long money where removing reinvestment risk is worth giving up liquidity. The full side-by-side, including where the ladder wins, is on payment streams versus a bond ladder.

What these assets are, and what they are not

Guaranteed and life-contingent structured settlement payment rights, and lottery payment rights, represent the right to receive factored payments that Pacific Structured Assets purchases and assigns to investors through a court-approved process. They are purchased at a discount to their total scheduled payments.

These payment rights are NOT annuities, NOT insurance products, and NOT securities registered with the U.S. Securities and Exchange Commission. They are not bank deposits, are not FDIC-insured, and are not protected by any state insurance guaranty association. The industry term “secondary market annuity” refers to these payment rights and does not mean you are purchasing an insurance annuity contract.

You acquire the right to receive the payments, not the underlying annuity. The annuity itself does not change hands. Unlike the original structured settlement annuity, which may be shielded from creditors under applicable law, the assigned payment rights you purchase generally do not carry that creditor or bankruptcy protection.

Assigned annuities, offered as a separate product line, are existing insurance annuity contracts reassigned to a new owner through a change of ownership or an irrevocable change of payee.

These are long-term holdings with limited liquidity, and may not be suitable for every investor. There is no public trading market and no daily price. Resale or reassignment of a payment stream to another buyer may be possible, and Pacific Structured Assets can assist, but a resale is not guaranteed and the price it would bring is not guaranteed. Because the payments are fixed, that resale value moves with prevailing interest rates: an investor could realize a gain if rates have fallen since purchase, or a loss if rates have risen. These holdings are best suited to capital an investor can commit for the long term. Nothing on this website is tax, legal, financial, or investment advice. Consult your own advisors before investing.

CD ladder questions

What is a CD ladder?

A CD ladder is a set of certificates of deposit bought at the same time with staggered maturity dates, so one comes due every few months or every year instead of all at once. Each CD is called a rung. It lets you earn something close to a long-term CD rate while still having money come free on a schedule, and it means you never have to break a CD early and pay the penalty.

How do CD ladders work?

You split a lump sum into equal pieces and buy one CD at each maturity you want to cover — one, two, three, four and five years, for example. When the one-year rung matures you take the cash if you need it, or buy a fresh five-year CD with it. Do that each year and after a full cycle every rung is a five-year CD, but one still matures every twelve months.

Is a CD ladder a good idea?

It is a good idea for money you want kept whole and available on a schedule, and a poor one for money that has to grow. A ladder is insured to FDIC limits and pays a stated rate, so the outcome is knowable. What it will not do is beat inflation by much, and every maturing rung has to be reinvested at whatever rates exist that day, which is the risk laddering spreads out but cannot remove.

How much money do you need to start a CD ladder?

Enough to clear each bank's minimum on every rung, which is commonly 500 to 1,000 dollars per CD, so a five-rung ladder often starts around 2,500 to 5,000 dollars. Brokered CDs typically trade in 1,000 dollar increments. At the other end, keep each institution's total under the 250,000 dollar FDIC insurance limit per depositor, per bank, per ownership category, or spread the rungs across banks.

What happens when a CD in the ladder matures?

The bank notifies you and opens a short grace period, usually seven to ten days, in which you can withdraw the money, add to it, or move it. Do nothing and most banks roll the CD automatically into a new term at whatever rate they are posting that day, which is frequently not their best rate. The whole discipline of laddering is making that decision deliberately instead of letting it happen by default.

Can you lose money in a CD ladder?

Within FDIC insurance limits you will not lose principal to a bank failure, because deposits are insured to 250,000 dollars per depositor, per insured bank, per ownership category. You can still lose purchasing power if inflation runs above the rate you locked, and you can lose interest, sometimes months of it, if you cash a CD in before maturity and pay the early-withdrawal penalty.

Is a CD ladder better than a high-yield savings account?

They answer different questions. A savings account is fully liquid but its rate can be cut the day after you open it. A CD ladder fixes the rate on each rung for its term, so a falling-rate stretch cannot reach the money already committed, at the cost of tying it up. Many investors run both: the savings account for the emergency fund, the ladder for money with a horizon.

How is a CD ladder different from a payment stream?

A CD is a bank deposit insured by the FDIC, and a ladder of them hands you back cash on staggered dates to reinvest at unknown future rates. A court-approved payment stream is not a deposit and is not FDIC-insured; you buy the right to receive a fixed schedule of payments at a discount, so the estimated yield is set once, at purchase, for the life of the schedule. Different instruments, and different risks — see Pacific Structured Assets for what that involves.

Pacific Structured Assets, Inc. does not provide tax, legal, financial or accounting advice. The material on this website has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial or accounting advisors before engaging in any transaction, including the acquisition of factored structured settlement payments. Pacific Structured Assets is not registered with the Securities and Exchange Commission and is not licensed to sell insurance in any state.

Pacific Structured Assets

Price your ladder before you build it.

The ladder builder prices CD, Treasury, bond and payment-stream rungs off live published rates, and you can type over any rung with a rate you have actually been quoted.

Open the Ladder Builder (800) 928-7680