CD Laddering and rate-bump CDs?

[donkinbros]

What's up everyone, I just registered to this site and this is my very first post. I don't know if I'm doing it right, please let me know. Anyway, I read an article earlier today about CD Laddering and rate-bump CDs, but it was kind of vague. Can anyone clear the air for me?.....thanks

[disneysteve]

Welcome.

Laddering refers to buying CDs with staggered maturity dates so that every 3 or 6 or 12 months you have one of your CDs maturing. The point behind doing that is so that all of your money isn't tied up for the same time period and that you get to reinvest at the prevailing rate when each one matures. For example, you could go out today and buy 3 month, 6 month, 9 month, and 12 month CDs. When each one matures, roll it over for 12 months. From then on, every 3 months, one will mature giving you liquid money if needed or letting you roll it over for another year.

[50Sense]

Rates are so low that I don't see the point in laddering CDs, personally....i would segregate assets in CDs if i had different goals for each CD, or different beneficiaries for each pool of funds, but I dont see anything attractive about laddering to capture yield these days.

[disneysteve]

Rates are so low that I don't see the point in laddering CDs, personally....i would segregate assets in CDs if i had different goals for each CD, or different beneficiaries for each pool of funds, but I dont see anything attractive about laddering to capture yield these days.

I agree on the yield point. There is still value in laddering so that you regularly have a pool of money coming due for iquidity purposes. That way, you minimize the chances that you'll have to cash out early and forfeit an interest penalty.

[bjl584]

With the way that interest rates currently are I'd be more in favor of keeping all of your cash in a Money Market or online savings account. There is no advantage to tying up any portion of your cash in CDs.