My Father-in-Law Is Building a $50,000 CD Ladder. Here's How Much It Will Pay Him Each Year

My father-in-law just pulled $50,000 out of the stock market.

He said he's "nervous" about where the economy is headed (aren't we all) and wants some money on the sidelines over the next few years.

Rather than letting the money sit in cash, I suggested he look into CDs. Specifically, he could build a CD ladder, which would give him guaranteed returns while also periodic access to chunks of his cash.

Here's how I'd build this $50,000 ladder today -- and what kind of interest it could earn each year.

The game plan I recommended

Personally, I'm a big fan of simplicity, so here's what I'd recommend for this CD laddering strategy.

I'd split the $50,000 evenly into five different accounts, with staggered end dates for five years.

• $10,000 into a 1-year CD
• $10,000 into a 2-year CD
• $10,000 into a 3-year CD
• $10,000 into a 4-year CD
• $10,000 into a 5-year CD

This way, one CD matures every year, giving him access to $10,000 (plus interest). As each year passes, he can decide at the time how he wants to use the funds. He could renew with another CD, invest the money back into stocks, or spend it!

How much a $50,000 CD ladder could earn

Let's assume we shop around and get the most competitive APYs on each CD right now.

Here are the rates we could lock in and how much interest each CD would pay out at maturity for each $10,000 deposit:

That's $5,689 in total interest earned across five years. And that's also assuming no renewals, so each year also returns the $10,000 initial deposit.

Not bad for a low-risk setup that still gives him regular liquidity.

You can also build your ladder however you want. Maybe start with just a 3-year ladder, or go shorter if you think rates will rise. There's no one right way to do it.

The best setup is the one that fits your timeline and gives you peace of mind.

What to do when a CD matures

What I love most about CD ladders is the flexibility.

It's not a rigid, 5-year locked-in plan… As each year passes and a CD matures, you hit a natural checkpoint. It's a chance to tweak your strategy, grab the cash, or just keep things rolling.

Here's what you can do each time a CD comes due:

• Reinvest it into a new long-term CD to keep the ladder going
• Take the cash if you need it for something big (or fun)
• Park it in a high-yield savings account temporarily while you wait for better rates

In my father-in-law's case, I honestly have no idea what he'll do with the first $10,000 that comes due. And that's kind of the point -- he gets to decide at the time.

He might reinvest it. He might take a vacation. He might give it to one of his money-savvy son-in-laws whose name starts with J. (Kidding -- unless you're reading this, David.)

Is a CD ladder right for you?

CD ladders aren't for everyone. But they make a lot of sense if you're sitting on a chunk of cash and don't have an exact plan for it.

You don't need $50,000 to make it work either. You could start with $5,000 or $10,000 and build your ladder with shorter terms. It's fully customizable to your timeline and comfort level.

It's a great way to lock in today's top rates, but still have steady access to your money over time.

Check out today's best CD rates and see if a ladder makes sense for you.