The No. 1 Strategy for Investing in CDs Right Now
Image source: Getty Images
If I were putting money into certificate of deposits (CDs) right now, I wouldn't wait. The Fed is expected to start cutting rates later this month, and once that happens, today's best CD yields will almost certainly slip lower.
My play? A CD ladder. But instead of spreading cash evenly across every term, I'd lean harder on the longer-term CDs that are still paying top APYs. That way, I can lock in today's higher rates for longer, while still keeping part of my money cycling back on a regular basis.
What is a CD ladder and why people love it
A CD ladder is when you divide your money across multiple CDs, each with different maturity dates.
The reason people do this is so they can earn higher interest than a savings account, without locking up all their cash long-term.
For example, instead of putting $20,000 into a single 2-year CD, you could split it like this:
- $5,000 into a 6-month CD
- $5,000 into a 12-month CD
- $5,000 into an 18-month CD
- $5,000 into a 2-year CD
As each CD matures, you have access to withdraw that $5,000 (plus the interest it's earned). At that time, you could reinvest the money into a new CD, or use it if needed.
One small downside though, is that when interest rates are falling, you'll almost certainly be renewing at a lower rate. This is why putting more money into longer terms and less into shorter terms might make sense.
Why 2025 calls for a weighted CD ladder
We're in a weird but temporary sweet spot: Interest rates are still high, but not for long.
According to the CME FedWatch Tool, there's a nearly 90% chance of a rate cut during the Fed's September 2025 meeting. And more cuts could follow.
Once that happens, CD rates will likely drop. And six months from now, your chances of seeing a 4.00% APY might be all gone.
So if you're building a CD ladder now, it may make sense to skew your allocation toward 2- to 3-year terms. That way, you lock in today's higher rates for longer and insulate yourself from future drops.
Here's an example of a weighted CD ladder with $25,000:
| CD Term | Amount | APY | Interest Earned |
|---|---|---|---|
| 6-month | $2,500 | 4.00% | $50 |
| 12-month | $2,500 | 4.00% | $100 |
| 18-month | $5,000 | 4.00% | $302 |
| 2-year | $7,500 | 4.00% | $612 |
| 3-year | $7,500 | 4.00% | $936 |
That's $2,000 in interest by the time your ladder is fully matured -- likely way more than you'd earn putting the same $25,000 into a short-term CD over and over.
But of course, not all banks offer strong rates across every term. Some only shine on short-term CDs, while others are better for locking in long-haul.
Want to find the best CD rates across multiple terms? We've rounded up the top CD accounts available right now. Compare your options here and lock in a great rate before yields drop.
Act while rates are still high
There's no single "right" way to set up a CD ladder. Some people like to space out terms every six months. Others prefer to go heavier on long-term CDs, or even keep some cash on the sidelines in a high-yield savings account.
You get to design it your way. Adjust your strategy based on your timeline, your comfort level, and your cash flow needs.
But no matter how you build it, act before rates drop. If the Fed starts cutting rates in the coming months, we may not see 4.00% APYs for a long while.
Compare the best CD rates available now and start building your weighted CD ladder.
Our Research Expert
Joel is a full-time Personal Finance Writer at Motley Fool Money, known for his clear, approachable voice on topics like credit cards, savings hacks, and side hustles. He’s been writing about money since 2018 and previously managed editorial content for the How To Money podcast.