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Why you should ladder your CD accounts now
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Certificates of deposit (CDs) are a popular place to put your savings for a few different reasons. For starters, they are efficient, low-risk and generally have a higher interest rate than other savings products. And, CDs are especially popular right now, as a high-interest rate environment means you can earn fairly significant interest.
But if you’re looking for a way to maximize your returns when using CDs, one slightly advanced strategy is to build a CD ladder. And, no hammers or nails are required to build one. It just takes a bit of planning and knowledge.
Start shopping for CDs online today.
Why you should ladder your CD accounts now
Laddering your CD accounts only requires you to open CD accounts at a bank and have money to fund the accounts.
CD laddering basics
When you buy a CD, you’re promising to keep your money in the bank for a set period of time in exchange for a set interest rate. The time period is generally between three months and five years. The rate is determined by the bank, and CD rates will vary between different financial institutions.
Right now, you can get rates of of up to 5.67% on a 1-year CD and up to 4.75% on a 5-year CD. Normally, longer-term CDs offer higher rates, but many banks are currently offering higher rates on shorter-term CDs instead. That said, online-only financial institutions generally offer some of the highest rates on CDs since they don’t have the same overhead costs that traditional banks have and tend to pass those savings along to consumers in the form of higher rates.
But while those rates are much higher than what was available in recent years, you can take it one step further and build a CD ladder. To do this, you’ll buy a series of CDs with varying terms, and while it’s not required, it can be useful to deposit the same amount into each.
For instance, your CD ladder might look like this:
- $2,500 1-year CD at 5.50%
- $2,500 2-year CD at 5.45%
- $2,500 3-year CD at 5.10%
- $2,500 4-year CD at 5.00%
At the end of the first year, that 1-year CD would be worth $2,637.50. Rather than take that money and put it back into your checking account, though, you would add another rung at the top of the ladder, depositing it all into a 4-year CD. Each year, when the term expires for one CD, you buy another 4-year CD until you either need to pull out your money or until rates are no longer attractive enough to warrant it.
Shop online to set up your CD ladder right now.
Why CD laddering makes sense now
The current interest rate environment is why CD laddering may be a smart idea right now.
“With inflation cooling, many are speculating that the Fed is done, or near the end, of hiking interest rates in this cycle,” says Jim Eutsler, a certified financial planner at HCM Wealth Advisors. “If that holds true, the favorable interest rates that can be earned on CDs are likely near, if not at, their peak. Creating a multi-year ladder of non-callable, FDIC-insured CDs is a great way to lock in the high interest rates available today and insulate yourself from the potential of falling rates which many are saying could become a reality in the back half of 2024.”
CD laddering lets you take advantage of both the high short-term CD rates that pay big interest for a shorter time, as well as the longer-term CD rates that are slightly lower but earn more over the CD term.
There is one thing to be careful with, though. When you use a CD, you are agreeing to keep your money in the account for the entire term. There are often substantial penalties for early withdrawals, so it’s important to make sure you won’t need access to the money you deposit until the CD has matured.
The bottom line
CD laddering is a strategy for building long-term wealth and taking advantage of the high interest rates currently offered on savings products. A CD ladder lets you continue to save over the long term and allows you to earn compounding interest by rolling your money into new CDs as they mature. With many speculating that interest rates are at or near their peak, now is an opportune time to consider this savings strategy.
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Tropical Storm Milton forms in Gulf; forecast to strengthen into hurricane headed toward Florida
Tropical Storm Milton has formed in the Gulf of Mexico and is forecast to strengthen into a hurricane headed toward Florida with possible impacts to its western coast, the National Hurricane Center said on Saturday. Maximum sustained winds are expected to be at 40 mph with higher gusts and Milton is currently moving north-northeast, NHC said in an advisory.
Milton is forecast to undergo a period of rapid intensification before it makes landfall as a Category 2 hurricane across Florida’s west coast, CBS News Miami reported.
The forecast comes a little more than a week after Hurricane Helene made landfall in Florida and across the Southeast, killing more than 200 people and causing immense destruction. President Biden on Thursday took an aerial tour of Florida’s Big Bend where Helene struck as a Category 4 storm. Hundreds of people are still missing and Mr. Biden said the work to rebuild will cost “billions of dollars” as communities suffer still without power, running water and passable roads.
NOAA
Milton is forecast to move across the southwestern Gulf of Mexico through Sunday night then across the south-central Gulf on Monday and Tuesday before reaching Florida’s west coast by the middle of the week, NHC said. Heavy rain is possible in the region starting Sunday into Monday, CBS Miami reported, and more rain and heavy winds will most likely arrive on Wednesday. Hurricane and storm surge watches will most likely be required for portions of Florida starting Sunday, the National Hurricane Center said.
Along with the heavy rainfall, the hurricane center said to expect risks of flooding.
Residents in the area should ensure they have a hurricane plan in place, the National Hurricane Center said, follow the advice of local officials and check back for forecast updates.
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A new Barbie has joined Mattel’s lineup of inclusive dolls. The first “Diwali doll” was announced by the toymaker on Friday, a few weeks shy of the Hindu holiday of Diwali, also known as the festival of lights.
The festival, which lasts for five days, is marked on Western calendars to begin on Nov. 1, but some celebrations start on Oct. 31.
The doll, created in collaboration with fashion designer Anita Dongre, features traditional elements including the lehenga skirt, floral print and golden shoes, according to Mattel’s website. The doll is available at major retailers for $40.
“The look is infused with beauty and symbolism to rejoice in victory of light over darkness with contemporary silhouettes,” the description reads for the Diwali doll.
Lalit Agarwal, country manager for Mattel India, said in a news release that through the Diwali doll, the brand is hoping to showcase “India’s vibrant cultural heritage on a global stage while continuing to celebrate the power and beauty of diversity.”
Earlier this year, Mattel announced the first-ever blind Barbie doll and a Black Barbie with Down syndrome.
In addition, to celebrate International Women’s Day on March 8 and Barbie’s 65th birthday on March 9, the doll brand announced it was adding new dolls to its Role Models collection, based on real-life singers and actresses from around the world. They’re not for sale – a one-of-a-kind doll was made for each of the honored women.
The dolls are meant to introduce “girls to remarkable women’s stories to show them you can be anything,” according to Mattel.
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