This Is How Much Money You Can Make With $10,000 in a CD Ladder

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Do you have an extra $10,000 on hand? Find out why laddering CDs with it could be a smart move. [[{“value”:”

There’s a benefit to putting money into a certificate of deposit (CD) over a savings account right now. The Federal Reserve has already lowered its benchmark interest rate once this year, and it’s expected to continue cutting rates over the next year.

This means savings accounts are likely to start paying less. So are CDs. Only with a CD, you can lock in a terrific interest rate now, before the Fed moves forward with additional cuts — which may happen as soon as early November. Click here for a list of the best CD rates today.

You may not want to put all of your money into a single CD. A CD ladder could be a much smarter move. And it might pay you a nice amount of interest to boot.

Why it makes sense to set up a CD ladder

With a CD ladder, instead of putting all of your money into a single CD, you divide your money and open multiple CDs with different maturity dates. The benefit is that a portion of your money frees up more frequently so that if you end up needing some of your cash, you can potentially avoid an early CD withdrawal penalty.

Remember, $10,000 is a lot of money to commit to a CD at once. So instead of putting all of it into a single 12- or 24-month CD, you could instead opt to split that sum into four different $2,500 CDs with varying terms.

Plus, given that CD rates are likely to fall soon, a CD ladder allows you to lock in a higher interest rate on a couple of shorter terms now, but it also lets you lock in a still-decent rate on slightly longer-term CDs. This gives you the best of both worlds.

What a $10,000 CD ladder might pay you today

The amount of money you earn from a CD ladder will hinge on the bank you choose and the different terms you commit to. To be clear, the following is just one example of what a CD ladder might pay you, and it assumes you open four CDs each worth $2,500.

All told, you’re looking at $501 in interest with a $10,000 CD ladder if you open CDs with these terms and APYs. But shop around for the best rates you can find. Also, get moving fairly quickly, if possible.

The Federal Reserve’s next meeting is slated for Nov. 6–7. There’s a good chance the central bank will decide to cut rates at that time, which could send CD rates downward. If you have the money to set up a CD ladder now, don’t wait.

But also, think about your comfort level when setting up a CD ladder. If you don’t like the idea of having to wait six months in between your CD’s maturity dates like in the example above, set up a ladder that has your money freeing up every three months. The nice thing about laddering CDs is that you can customize a setup that works best for you.

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